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Delta Touches Two-Year High Amid 4% Seating Capacity Cuts

Delta Air Lines Inc. (DAL) rose to the highest price in two years amid plans to cut seating capacity as much as 4 percent to help temper increased spending on labor and fuel.

International capacity will shrink by 3 percent to 5 percent in the three months through March, led by reductions of as much as 10 percent on trans-Atlantic routes during the seasonally slow period, Delta said today. Domestic capacity will fall 1 percent to 3 percent, Delta said.

The moves are intended to help the world’s second-largest carrier maintain pricing power as a sluggish economy limits its ability to raise fares after the holiday travel peak. Revenue for each seat flown a mile, the U.S. industry benchmark, will rise by 4 percent to 6 percent in the period, the company said.

“We enter 2013 as a stronger airline, with initiatives in place to build on our 2012 success,” Chief Executive Officer Richard Anderson said in a statement as the airline reported fourth-quarter earnings.

Delta said in December that its full-year capacity for 2013 would be unchanged with a “downward bias.” Investors and analysts typically favor capacity reductions because they give airlines more leeway to raise fares and can help lower costs.

The airline’s shares rose 2.9 percent to $14.01 at the close in New York, the highest since November 2010. Delta jumped 49 percent in the last 12 months.

Profit in the quarter, excluding some items, was $238 million, or 28 cents a share, the Atlanta-based carrier said in the statement. That matched the average of 16 estimates compiled by Bloomberg.

Fleet Changes

Higher wages and salaries and an 18 percent jump in fuel damped earnings for Delta, which is trying to lower costs by $1 billion by retiring older jets. Superstorm Sandy, which slammed into the eastern U.S. coast in October, curbed profit at the airline and its Pennsylvania refinery by $100 million.

Delta had a $231 million one-time charge for the quarter that ended in December, most of it related to restructuring the domestic fleet and refinancing debt on Pacific routes.

Including those items, net income fell 98 percent to $7 million, or 1 cent a share, from $425 million, or 50 cents, a year earlier. Revenue increased 2.4 percent to $8.6 billion

Delta is the second major airline to report fourth-quarter results. American Airlines parent AMR Corp. (AAMRQ) said last week its loss excluding some items narrowed to $88 million as the company pared labor and aircraft-leasing costs in bankruptcy.

To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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