By James Pilcher
The Cincinnati Enquirer

Delta Air Lines Wednesday reported a fourth-quarter loss of $327 million including special items, and the nation's third-largest carrier ended a tumultuous 2003 with a $773 million loss.

Excluding the unusual items, the quarterly loss was $207 million, or $1.71 a share, a bit steeper than the $1.67-a-share loss predicted by analysts surveyed by Nelson Information/Thomson Financial. The annual loss excluding special items was $1 billion, or $8.58 a share.

"While in line with our expectations, today's financial results are disappointing, especially given the expected performance of the other air carriers," said Delta chief executive Gerald Grinstein, who took over for former CEO Leo Mullin Jan 1.

Mullin, who was embroiled in a pay scandal early in 2003, retired and will give up his seat as chairman of the board later this year.

Delta, which operates its second-largest hub at the Cincinnati/Northern Kentucky International Airport, has 4,000 workers locally and its subsidiary, regional carrier Comair, employs another 4,000.

It was the first of the nation's airlines to report fourth-quarter and year-end results. Other airlines are expected to report a rosier fourth quarter, according to many analysts.

The company lost $323 million, including special items, in the fourth quarter of 2002, and lost $1.2 billion including special items for all of 2002.

Revenues for the fourth quarter were $3.1 billion, a 2.6 percent increase over the same period in 2002.

Shares in Delta closed at $12.15, up a penny, Wednesday.

Delta said it finished the fourth quarter of 2003 with $2.9 billion in cash, including $2.7 billion in readily available funds, although company officials said they expected a first-quarter 2004 loss of $300 million to $350 million.

The loss is a stark contrast to the apparent profitability of Delta's Erlanger-based regional subsidiary Comair. According to U.S. Transportation Department data, Comair reported a net profit of $32.1 million in the third quarter (fourth-quarter results are not yet available from the government).

That is the third straight profitable quarter for Comair, according to federal statistics, and the third straight quarter that profits increased.

Delta chief financial officer Michele Burns said Delta pays for all but operational costs for a Comair passenger, with such costs including the debt for new airplanes, marketing and distribution and other costs.

But she said the company could not say whether Delta makes money on Comair passengers, adding that such statistics were considered for the entire network.

Still, she did say both Comair and fellow regional subsidiary Atlantic Southeast "contribute positively to the overall system and to our bottom line."

Burns also stressed that Delta is not considering selling off parts or all of Comair or ASA, even as US Airways is seeking to sell off parts of its mainline and regional system.

"Our situations are so fundamentally different ... all our assets and especially our airline assets are all part of a complex system that are all valuable to us," Burns said.

The majority of the fourth quarter's special items were $26 million in charges associated with Delta's decision to sell 11 Boeing 737s previously scheduled for delivery in 2005 and a $134 million charge taken for pilot pensions because of an unusually high number of pilot retirements. The sale of the planes is supposed to save Delta $500 million through next year.

Throughout Wednesday's conference call with industry analysts, Grinstein reiterated his desire to renegotiate the company's contract with its pilots. Talks restarted last month after stalling over the summer and fall, but the two sides still are far apart.

Management is seeking an almost 30 percent cut in wages along with changes in work rules, while the pilots have countered with a 9 percent cut.

During the call, Burns said that if Delta had pilot costs equal to fellow hub-and-spoke carrier American Airlines or low-cost competitor JetBlue, it would have seen an additional $120 million to $220 million, possibly even putting the company into the black for the quarter. Delta president and chief operating officer Fred Reid reiterated that more job reductions could be necessary.

Delta employs 8,500 pilots, including about 900 in Cincinnati.

Wednesday, officials with Delta's branch of the Air Line Pilots Association told its members in a taped voice message that no new negotiating sessions had been scheduled. The union also said "management's apparent 'all or nothing' stance" could mean that the union would not talk about concessions now and begin concentrating on preparing for the normal negotiations for when the contract is about to be renewed.

E-mail jpilcher@enquirer.com