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Tribune News Service
Tribune News Service
Business
Kelly Yamanouchi

High air fares help Delta climb above fuel, payroll costs

Delta Air Lines reported a $695 million profit for the third quarter of this year, with pricey air fares bringing in record revenue that covered higher costs for fuel and payroll and then some.

Atlanta-based Delta’s unit revenue — an industry measure of how much a passenger pays to fly each mile — was up 23% in the quarter compared with 2019.

Delta in the third quarter flew 17% less capacity than it did in the same period of 2019, yet brought in 3% more revenue, boosted by higher prices for flights.

The company’s $695 million in net income was down by nearly half from $1.2 billion reported by Delta for the third quarter of 2021. But in that year-ago quarter, the company benefited from $1.8 billion in government relief funding.

Delta had a record $14 billion in operating revenue in the third quarter of 2022, up more than 50% from $9.2 billion a year earlier.

But its operating expense nearly doubled to $12.5 billion from a year ago, with salaries and related expenses up 18.9%, aircraft fuel expense more than doubled and other increased expense.

The airline took a $70 million hit from Hurricane Ian in late September, which caused multiple airports in Florida to temporarily halt operations. The Fort Myers airport, where Delta is the largest carrier, was damaged and didn’t reopen until Oct. 5. It didn’t have drinking water until Oct. 11, when a boil water advisory was lifted.

Across multiple airports in the storm’s path, “it was a series of disruptions” that drove flight cancellations, said Delta CEO Ed Bastian. Ian took a $35 million toll on Delta’s financial results in the third quarter. Ian has also led to reduced flight bookings to affected destinations in Florida and Bastian expects the hurricane effects to take another $35 million bite out of Delta’s results for the October-December quarter.

The airline has been focusing on restoring reliability more broadly to its operations. Amid a resurgence in travel earlier this year, passengers on Delta and other airlines suffered through mass cancellations and flight disruptions. In response, Delta said it would cut back flying for the summer, and then in July said it would halt flight growth for the rest of the year to limit cancellations.

So far, Delta has restored more flights to hubs in New York and Los Angeles than to Atlanta, Bastian said.

Atlanta is a “fortress hub” where Delta controls about 80% of the market. But New York and Los Angeles each have multiple major global carriers with large operations competing for customers, and Bastian said those are “strategic areas we wanted to make sure we protected.”

“That said, Atlanta is going to be the focal point of our growth over the next six to nine months” in preparation for next summer, Bastian said. He said about half of Delta’s planned domestic growth will touch Atlanta. “It’s going to be good for the city,” he said.

Bookings for the fourth quarter including the holidays “look really strong,’ Bastian said. “Business is continuing to come back.”

The airline plans to restore its flight capacity back to 2019 levels by summer 2023.

Bastian said the airline had been planning on a recovery taking two to three years.

“It’s how we looked at our pilot staffing and pipeline,” he said. That more conservative approach meant that when travel rebounded strongly this year, it took Delta by surprise and the airline did not have enough pilots hired and fully trained on specific aircraft to staff a fully restored schedule.

Bastian said his priority is “to make sure by next summer we can fly our full summer schedule” with enough staff and reliability.

Amid concerns about a potential recession, Bastian said: “We’re aware of some macro-headwinds out there,” Bastian said. “If the demand is not all the way back, we have the tools to manage that back down a bit.”

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