Delta cites improving revenue trends

Chief Financial Officer Hank Halter said that while the carrier still expects unit revenue to be down in the fourth quarter, the magnitude of the decline was softening from earlier this year.

Delta's unit revenue was off about 23 percent in June, he told a Morgan Stanley transportation conference.

"By October, we were down in the 11-12 percent range and for the fourth quarter, our previous guidance was unit revenue down about 8 percent and we're tracking to that," Halter said.

Still, Halter said the majority of its bookings were still for seats at the rear of an aircraft as opposed to pricier upfront cabins.

He also said corporate sales, which represent about 20 percent of Delta's passenger revenue, were still down but the declines have moderated to the single-digit percentage range from a drop of as much as 35 percent in April/May.

"The key is that demand is there, the key is that revenue is coming back on a sequential basis but it's taking time," Halter said.

The finance chief also reiterated that Delta expects total liquidity of $5 billion by the end of the year, and was still taking cost-cutting steps that include exiting the freighter business.

Shares of airlines were stronger on Wednesday as Morgan Stanley boosted its view of the sector. The Arca Airline index <.XAL> was up 3 percent.

"If you're a believer in a recovery, you can argue for a fair amount of upside from here," Morgan Stanley analyst William Greene said before Halter spoke. Greene said his firm felt better about recommending airlines in the wake of last week's news from US Airways Group, which announced on November 24 that it was postponing some plane deliveries to cut spending and planned to extend certain debt maturities.

Airlines have been hampered this year by reduced travel spending, a drop in trade and rising oil prices. But the International Air Transport Association said earlier this week that passenger demand for air travel rose in October even as freight demand continued to fall, boosting optimism that the industry could be on its way to a recovery.

Among carriers, United parent UAL Corp was up more than 10 percent on Wednesday and Continental Airlines Inc and American parent AMR Corp gained 6 percent. Delta shares were up 50 cents, or 5.8 percent, to $9.12.

(Reporting by Karen Jacobs, editing by Dave Zimmerman)

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