Tepid outlook overshadows strong Delta profit in 4Q
DALLAS (AP) — Delta Air Lines expects to lose $25 million in revenue this month from the partial government shutdown that is also creating checkpoint delays and long lines at the airline’s Atlanta hub.
Delta’s revenue is more than $3 billion a month, so the setback isn’t huge, and airline executives say overall travel demand remains healthy. Still, it contributed to a tepid forecast of first-quarter profit.
The shutdown has grounded many government employees and contractors who regularly fly on Delta. On top of that, some federal aviation inspectors remain furloughed, which is hindering Delta’s ability to add new planes to the fleet because the jets must first be certified by those inspectors.
“But it’s our customers who are seeing the biggest impact, with longer lines at airport security,” CEO Ed Bastian said Tuesday on a call with analysts and reporters.
The Transportation Security Administration initially said that 7.6 percent of its airport screeners missed work on Monday, but it later revised the number down to 6.8 percent. That’s still well more than double the 2.5 percent absent rate on the comparable Monday last January.
With fewer screeners on the job, it took passengers at Atlanta’s airport more than an hour to get through security during peak periods. Airports in Miami and Houston have closed checkpoints to consolidate screeners at remaining checkpoints.
Bastian said delays were limited to a few airports, not across its system, and that flights were running on time.
The Delta CEO made the comments as the company announced that it earned $1.02 billion in the fourth quarter, up from $299 million a year earlier on a 5 percent boost in revenue, lower income taxes, and a gain from investments. At $1.30 per share excluding special items, the results slightly beat Wall Street expectations.
However, the airline issued a lukewarm outlook for January-through-March earnings — between 70 and 90 cents per share, compared with the mean forecast of 93 cents per share among analysts surveyed by FactSet.
Behind that forecast: weaker revenue growth, which Delta blamed partly on the government shutdown. The airline said so-called unit revenue will be flat to up 2 percent in the first quarter, compared with 3.2 percent in the final three months of 2018.
U.S. airlines have been become consistently profitable in recent years, helped by mergers, cheaper fuel at times, and more revenue from extra fees. No one knows, however, how they will hold up during a recession, when lucrative business travel would likely slow down.
Delta President Ed Hauenstein said that with rising fares for leisure travel and falling prices for corporate customers, the gap between the two has never been smaller.
“That should make the whole industry less cyclical,” he said.
Delta was the first U.S. airline to report fourth-quarter results. United Airlines’ parent company was scheduled to issue its numbers later Tuesday.
Shares of Delta Air Lines Inc. closed up 8 cents, at $47.83. They have fallen 19 percent from a year ago.
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David Koenig can be reached at http://twitter.com/airlinewriter
The Western Journal has not reviewed this Associated Press story prior to publication. Therefore, it may contain editorial bias or may in some other way not meet our normal editorial standards. It is provided to our readers as a service from The Western Journal.
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