Delta 3Q profit surges on fuel gains

Delta Air Lines reported a billion-dollar third-quarter profit and said demand is holding up well.

The world's second-largest airline posted net income of $1.05 billion, or $1.23 per share, compared with $549 million, or 65 cents, a year earlier. Most of the increase was due to a $440 million gain from fuel hedges.

The results come as Delta aims to pull ahead of struggling U.S. rivals. United has stumbled while absorbing Continental. American is reorganizing under bankruptcy protection. And Southwest is still integrating AirTran _ 17 months after buying the company.

Delta has been posting per-passenger revenue gains that have been higher than other airlines, and is aiming to cut fuel costs by purchasing an oil refinery near Philadelphia.

"We think we have competitive advantages that will allow us to sustain the distance that we have put between ourselves and the industry," CEO Richard Anderson said on a conference call Wednesday.

There are risks, of course. The refinery bet could go bad. Delta's efforts to pay down its debt could falter. Maxim Group analyst Ray Neidl said in a note that investors may be worried about Delta's pension liabilities. Those liabilities could keep Delta from reaching its debt-repayment goals "for the foreseeable future and we believe will continue to put heavy pressure on the stock price," Neidl wrote.

Shares of Atlanta-based Delta Air Lines Inc. fell 11 cents to close at $10.04 Wednesday.

Excluding special items, it earned $768 million or 90 cents per share _ a penny less than analysts expected, according to FactSet.

Revenue rose 1 percent to $9.92 billion, also just under analyst expectations.

Delta is eyeing a per-passenger revenue improvement of 4 percent to 5 percent in October, well above the 0.5 increase in September. The gains will be smaller in November, though, it said.

Delta is making moves to cut costs. It wants to shift to bigger planes to reduce maintenance spending and to give passengers a better flying experience.

The airline it is getting competing price quotes from regional jetmakers Embraer of Brazil and Bombardier in Canada for a possible order of up to 70 new 76-seat regional jets. Delta's new contract with its pilots allows it to use more jets of that size in exchange for eliminating 50-seat jets.

Delta hopes to decide around the end of this year whether to order the jets and how to structure any potential deal, Anderson said.

US Airways reported a record third-quarter profit on Wednesday. Southwest Airlines said last week it squeezed out a small profit in spite of a September slowdown.

United Continental Holdings Inc., the parent of United Airlines, reports results on Thursday.