DAL announced that it will cut capacity 6%-8% in 2009 because of weaker travel demand. Furthermore, international capacity will fall 3%-5%. This follows its June 2008 announcement that it will reduce its capacity by 13% in the second half of 2008.
The Wall Street Journal reported that Delta will be revising an order it placed with Boeing earlier this year.
Prices of jet fuel continue to fall, with barrels of crude trading at near $68 down more than half than its peak in July 2008. As a result, DAL and many other airlines have boosted their profit estimates.
After clearing antitrust regulatory hudles, Delta successfully merged with Northwest in a $2.6B all stock transaction, creating the world's biggest airline.
As the merger nears, Delta has decided to increase its cash position and liquidity by tapping a $1 billion credit line it had negotiated during bankruptcy. The company also claims to have renegotiated with credit card companies to ensure proper revenue turn over. [1]
Directors of both Delta and Northwest agreed to merge the two companies. Holders of shares of Northwest would receive 1.25 shares of Delta in the proposed deal.
An inability to integrate pilots' seniority in a manner acceptable to the pilots' union grounds the delta / northwest merger, eliminating the hope for reduced capacity in the airline industry.
Rumors surface on Jan 9 and are confirmed on Jan 15 of merger talks with Delta. Airline industry mergers historically drive up share prices because they consolidate markets, reduce competition, and help drive up ticket prices.
As oil prices marched towards $100, investors grew concerned that airline profitability would be pressured by higher costs. Delta shares lead the sector decline.
Edit Metric
