Delta Air Lines reported a profitable third quarter, despite facing challenges such as a $500 million hit from a July service meltdown caused by a software issue related to CrowdStrike. The airline had to cancel about 7,000 flights over the course of a week due to problems with its crew tracking software. Delta took longer than its competitors to fix the issue, resulting in a $380 million loss from canceled flights and an additional $170 million in increased costs. Despite these challenges, Delta still managed to earn adjusted income of $971 million in the quarter, down 26% from the previous year, on revenue of $14.6 billion, which was essentially unchanged from a year ago.
In addition to dealing with the service meltdown, Delta also faced slightly lower average fares in the quarter, a trend seen across the industry. However, this was offset by a 3% increase in miles flown by passengers, as travelers returned to flying with Delta despite the earlier service disruptions. The airline also reported a 9% drop in average fuel prices paid, which helped to mitigate some of the losses incurred from the canceled flights. Labor costs were cited as the largest cost for the airline.
Looking ahead, Delta expects a strong holiday quarter and anticipates a 30% rise in earnings, making it one of the most profitable quarters in its history. Early bookings for the holiday period are strong, although the airline expects a slowdown in travel in early November due to the US election. Delta’s CEO, Ed Bastian, mentioned that they can see a pause in travel activity around the election period, as people may prefer to wait until after the election to make travel plans. The uncertainty surrounding the election outcome may be causing some individuals to delay discretionary spending until after the election.
Overall, Bastian remains optimistic about the future outlook for travel, noting that Thanksgiving and Christmas bookings are strong. He mentioned that typically, people prefer to wait until after the election to make travel plans, and this trend has been observed in past elections as well. Despite the challenges faced by Delta in the third quarter, the airline remains confident in its ability to bounce back and generate strong earnings in the upcoming holiday period. Delta’s focus on customer service and cost management has helped it navigate through difficult times and position itself for future success in the airline industry.
