MINNEAPOLIS — Higher fuel prices and weak passenger traffic caused Delta Airlines to post a smaller than-expected profit in the third quarter.
The results pushed down the Atlanta-based company’s stock price 5 percent Tuesday. Delta expects high fuel prices and economic uncertainty to continue next year and said it will keep cutting back on flying to make sure the cost of operating planes doesn’t outrun travel demand.
Those costs are weighing on the industry, which is in the midst of a precarious recovery that started last year. Even with higher fares, Southwest Airlines Co. and American Airlines’ parent AMR Corp. posted losses earlier this month because of soaring fuel costs. United Continental reports results Thursday and investors are watching to see if the world’s biggest airline can keep expenses under control.
In the past, airlines struggled to make money in a weak economy or when fuel prices rose. Now, they appear committed to raising prices or cutting back on flying to stay profitable.
Delta said it cut its flying by 1 percent in the most recent quarter, compared with a year earlier. And it expects to cut as much as 5 percent more during the last three months of 2011. In 2012, it will reduce capacity by 2 to 3 percent from this year. By making fewer seats available, airlines gain the power to raise prices if demand holds steady.
Delta’s third-quarter yield - one way of measuring fares - rose 11 percent compared with a year earlier. Traffic fell slightly, although Delta said business travel, which generates more profit, remained strong.
Delta and other big carriers pushed through another fare increase on Monday, although it may not stick. United, Continental and Delta added up to $5 each way to ticket prices for many flights within the U.S. It’s the second increase in a week after more than two months when base fares were largely unchanged.
Delta Air Lines Inc. reported net income of $549 million, or 65 cents per share, up 50 percent from $366 million, or 43 cents, a year earlier. Revenue rose 10 percent to $9.8 billion.
Before losses on fuel hedging and other items, Delta would have earned 91 cents. That was 3 cents less than expected by analysts surveyed by FactSet.
The company ended the quarter with $3.3 billion in cash, $600 million less than at the same time last year. It cut its debt to $14 billion, $1.2 billion less than a year earlier. Delta said it is still on track to reduce its debt to $10 billion in 2013.
“We anticipate that the current environment of high fuel prices and an uncertain economy will continue into 2012,” Hank Halter, the airline’s chief financial officer, said in a memorandum to employees.
Shares fell 46 cents, or 5.2 percent, to close at $8.44. For the year, they have fallen about 32 percent.
“The shares are probably trading on oil,” said Helane Becker, an analyst at Dahlman Rose & Co. in New York. She said earnings were “roughly in line” with her expectations.
Christmas holiday bookings are “look pretty good,” Delta President Ed Bastian said on a conference call with analysts.
Information for this article was contributed by Mary Jane Credeur of Bloomberg News.
Business, Pages 29 on 10/26/2011