Delta is the latest U.S. carrier to report a profit excluding special items, as well as an operating profit, and is echoing industry optimism that demand is finally starting to strengthen.

While the carrier's net loss of $161 million was worse than last year's $50 million deficit, it made a $51 million profit excluding special items - which was a $115 million improvement from the same quarter in 2008. Delta saw an operating profit of $204 million in this year's third quarter.

CEO Richard Anderson noted that there has been "some improvement in the revenue environment," with unit revenue improving month-by-month since hitting a low point in June. Airline President Edward Bastian said the industry is "in the early stages of what will probably be a choppy and uncertain recovery, [although] we are seeing the right trend lines." Airlines are gaining more traction on the yield front, as evidenced by recent successful fare increases, Bastian said.

Travel on corporate accounts is down 10% compared to the previous year, with corresponding revenues falling 25%. However, the airline stressed that this was much better than the 40%-50% declines it was seeing in the first half.

Fourth-quarter unit revenue is projected to be down 8% year-on-year for the fourth quarter, which would be 10 points better than the decrease in the third quarter. Domestic yields are likely to be down 10% year-on-year in the fourth quarter, with international dropping 12%.

Systemwide capacity will drop 10% in the fourth quarter, with consolidated domestic capacity falling 5%-7% and international declining 14%-16%. For the full year 2010, system capacity should be down 3% compared to 2009. International capacity is forecast to be essentially flat, despite the wave of summer network additions the carrier announced this week. Executives signaled they will be making further announcements about New York-London service in the next few weeks.

The carrier says it has achieved its 2009 target for merger-related gains three months early. The airline was targeting $500 million in cost savings and extra revenue for this year, but has passed this and now expects to reach $700 million.

Delta is still on track to have its single operating certificate approved by the end of this year. More than 600 pre-merger corporate contracts have been renegotiated, and about 230 Northwest aircraft have been repainted. More than 98% of airport facilities have been consolidated.

For the third quarter, Delta's revenue dropped 21% to $7.6 billion compared to last year, after Northwest data is factored in. Overall unit revenue declined 17%. Operating costs fell $2.1 billion thanks to lower fuel prices. Consolidated and mainline unit cost, excluding fuel and special items, rose 2% because of higher pension expenses. At the end of the quarter, the carrier had $5.8 billion in unrestricted liquidity, including $5.5 billion in cash, cash equivalents and short-term investments, and $300 million available through a revolving credit facility.

Photo credit: Delta Air Lines