Delta battles rise in costs, including hurricane flight cancellations

Kelly Yamanouchi, The Atlanta Journal-Constitution on

Published in Business News

ATLANTA -- Delta Air Lines said on Wednesday that, although flight cancellations due to Hurricane Irma are putting pressure on its costs, a busy summer travel season has resulted in improving revenues.

"While we faced a number of challenges this quarter, including multiple hurricanes and an earthquake in Mexico, I am proud of how Delta people responded and still delivered an outstanding performance this quarter," Delta CEO Ed Bastian said in a written statement released as the company reported more than $1.1 billion in profit in the third quarter, down 6 percent from more than $1.2 billion a year ago.

Atlanta-based Delta's pre-tax income took a $120 million hit from Irma-caused flight cancellations at its massive Atlanta hub as well as in other cities in Georgia and in the Caribbean and Florida.

That takes into account a $140 million reduction in operating revenue due to Hurricane Irma. While flight cancellations mean less expense for operating those flights, the reduction in operations drives up unit costs.

The airline is operating fewer flights to and from the Caribbean since the storm, it said.

In contrast, Delta president Glen Hauenstein said the airline has seen little impact to passenger demand for flights to Las Vegas in the wake of the mass shooting there Oct. 1.

"There is not a material decline in traffic to and from Vegas," Hauenstein said. "That was a surprise. I hope it's not a sad commentary on the human state, that we're getting used to this."

The company also expects its costs for this year to rise due to increases in profit sharing to be paid to employees.

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"For us, profit sharing is a tool ... making certain our employees are the very best paid provided we deliver and they deliver the very best performance," Bastian said. He said it also allows the company to make its costs variable for the future -- so that such employee payouts grow only when profits grow.

But Bastian pledged to investors that the company would work to keep unit-cost increases lower in the future.

"Four percent unit cost growth is unsustainable," Bastian said, adding that the company will focus on reducing the growth next year.

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