Delta battles rise in costs including hurricane flight cancellations

1:19 p.m Wednesday, Oct. 11, 2017 Business
Delta Air Lines canceled 900 flights as tropical storm Irma made its way towards Atlanta. Credit: JOHN SPINK/JSPINK@AJC.COM

Delta Air Lines said flight cancellations due to Hurricane Irma are putting pressure on its costs, but after a busy summer travel season revenues are improving.

“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,” said Delta CEO Ed Bastian in a written statement 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.

Channel 2’s Consumer Advisor Clark Howard breaks down how to deal with airlines and hotels when your trip has been changed or cancelled.

Atlanta-based Delta’s pre-tax income took a $120 million hit from flight cancellations due to Hurricane Irma 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.

And, Delta has cut back on flying in the wake of the recent hurricanes, due to damage to infrastructure in the Caribbean.

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.

“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.

View full experience