Delta Profit Drops On Staff, Fuel Cost Increases

Delta Air Lines on Thursday reported a second-quarter net profit drop of 21 percent as fuel and staff costs rose.

Net profit of USD$1.22 billion for the quarter to end June was down from the previous year's $1.55 billion, partly due to bad weather in April at its Atlanta hub which caused the cancellation of around 4,000 flights.

Despite the weather effect, revenue for the quarter edged up 3 percent to $10.79 billion, but costs climbed 9 percent to $8.76 billion, leading to a drop in operating profit to a shade over $2 billion, 16 percent down on 2Q16.

Higher fuel costs, up $220 million to $1.45 billion, contributed to the increased costs, with Delta reporting adjusted fuel price per gallon for the quarter of $1.66.

The other major cost increase was staffing, with salaries and related costs up 9 percent at $2.62 billion.

Delta agreed new contracts over the last year with several labour groups including pilots and cabin crew, which added to staff costs. The airline also paid an additional $338 million to its employee profit sharing scheme.

“The June quarter ranks among the best in Delta’s history,” the airline’s chief executive Ed Bastian said. “While 2017 is a transition period for Delta, we are encouraged by the improvement in unit revenues, leading to increasing conviction in our ability to expand margins,” he added.

Unit revenue was up 2.9 percent, with RPM passenger traffic up 2.1 percent. ASM capacity rose by a more modest 0.4 percent, resulting in a passenger load factor increase of 1.4 percentage points to 86.9 percent.

“The June quarter marked Delta’s return to unit revenue growth after two and a half years,” Glen Hauenstein, Delta’s president said. “We expect this momentum to continue in the September quarter, with passenger unit revenue growth of 2.5 to 4.5 percent as we focus on driving a sustainable revenue premium to the industry.”

Delta also took delivery of its first Airbus A350 on Thursday. Ordered to replace older Boeing 747s and 767s, it will enter service in October on its Detroit to Tokyo Narita route. Delta has a further 24 A350-900s on order.