It appears Delta and Northwest are collapsing into each other’s arms. The two airlines, which recently agreed to merge, reported big first-quarter losses totaling about $10 billion, though most of that was for non-cash charges to write down goodwill lost over the last year by soaring oil prices. The Journal says on its Marketplace front that before these special items, the losses were a combined $465 million.

Jet fuel prices rose 63 percent from a year ago, says Bloomberg, pulling all the major airlines into the red. The New York Times says on C2 that the airlines need to hang significant price hikes on consumers to return to profitability.

Apple good, coffee bad

In earnings news, Apple continued the wave of good technology reports, with sales up 43 percent and profits up 36 percent on strong sales of its Mac computer line, though iPod sales were flat.

But Starbucks was “scalded,” as the Journal says on B3, by slower sales in the first quarter and says it expects to report lower profits. Same-store sales were down in the “mid-single digits,” it said, hurt by the housing busts in California and Florida, which combined account for nearly a third of its sales.

The LAT takes a look at the state of coffee drinkers’ habits and finds people are detoxing.

Skimping on sauce won’t pack ’em in

It’s a bad time for restaurants generally, which the WSJ on page one says is in its “worst slump in decades” with “almost all segments struggling.”

Many chains have scaled back expansion plans or cut costs by skimping on things like extra sauce and free sour cream. Some are shuttering sites and laying off workers. Private-equity firms, which plunged into the business earlier this decade using gobs of borrowed money, are now especially vulnerable as those debts come due.

We say good riddance to the sour cream, but extra sauce? Slow down!

The Journal says eating in has big repercussions for the economy since restaurants are the third biggest employer in the country and kindly notes that “Many of those jobs are held by the poor and immigrants who have few other options for work.”

Village Inn, a diner chain where we many nights of our youth were misspent, is shaving an ounce off its hash brown servings and studying the implications of reducing the number of sugar packets it puts out on the tables.

The WSJ says analysts don’t expect things to turn around soon: there’s a glut of restaurants, with 45 percent more open now than in 1990.

Bond insurers bomb

It’s been a while since we heard from the bond insurers, and true to form, they’re back in the papers with bad news. Ambac Financial lost $1.7 billion in the first quarter, about eight times the loss analysts had expected, the WSJ says on its Money & Investing front. Its shares plunged 43 percent to their lowest level yet, and rival MBIA’s were down a third.

That sparked our “Financial Recovery? Not Just Yet” Quote of the Day from Bloomberg:

“Just when you thought things are getting back to normal, there are these horrible numbers,” said Robert Haines, an analyst at CreditSights Inc., an independent bond research firm in New York. “If trends like this continue, they are going to have to go back to the markets very soon” (to raise capital).

But Bloomberg quotes an analyst saying the company may not be able to raise more capital, meaning a downgrade by the credit-rating firms will be “unavoidable.”

The papers say the losses raise concerns yet again about whether it will be able to keep its AAA credit rating, which is crucial to its business and to the prices of the $1 trillion in debt it has insured. If the firms are downgraded, it would spark a wave of forced selling that would hammer financial markets.
The FT says Ambac warned that its subprime losses may reach $3 billion, though it doesn’t say if that’s for future losses or includes past ones.

The Times slaps a Reuters story on C3 that reports Ambac saying it’s “writing very little new business” now.

Safety in numbers

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at