Delta warns that capacity cuts are coming

By HARRY R. WEBER , Associated Press

Last update: November 21, 2008 - 10:12 AM

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ATLANTA - Nine days after announcing new overseas routes for 2009, Delta Air Lines Inc., the world's biggest carrier, said in a regulatory filing Friday it plans to reduce future domestic and international capacity because demand for seats has slowed amid the global financial crisis.

The Atlanta-based airline did not provide specifics, but did say it would give more details about its outlook in early December.

Spokeswoman Betsy Talton said Delta still plans to add starting next spring the 15 new international routes it announced Nov. 12, but the company will continue to monitor performance.

It was unclear if future capacity reductions would mean a net reduction in international capacity next year or simply smaller growth. When the new overseas routes were announced, a Delta executive told reporters that overall international capacity in 2009 would be slightly larger than in 2008, while overall domestic capacity would be slightly smaller.

In a Securities and Exchange Commission filing Friday, Delta said that demand has slowed over the course of the fourth quarter, which began Oct. 1 and ends Dec. 31. Domestic advance bookings are running two points higher year-over-year, reflecting capacity reductions in the domestic system. International bookings are down 4 to 5 points, Delta said.

"As a result, we are evaluating our capacity plans for 2009 on both the domestic and international system and expect to reduce future capacity to better align supply with current levels of demand," Delta said.

Delta said that as a result of its $2.8 billion acquisition of Northwest Airlines, which it completed Oct. 29, Delta's consolidated reported results for the fourth quarter will include Northwest results from Oct. 30 through the end of the year, in addition to Delta's standalone results for the entire quarter. The comparable 2007 figures will include only Delta standalone results.

The airline said its guidance in its investor update Friday excludes special items and the impact of applying purchase accounting to the merger.

Delta said that for the fourth quarter, it expects operating margin to be 0 percent to minus 2 percent. Operating margin is operating income as a percentage of sales or revenue.

It said consolidated revenue per available seat mile would be up 2 percent to 4 percent. It said system capacity would be down 4 percent in the quarter.

Delta's shares fell 1 cent to $7.01 in morning trading Friday.

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