Delta sees record $1.5B profit in Q3

‘It was the busiest summer in our history,’ CEO Ed Bastian says.

Delta Air Lines reported net income of $1.5 billion for the third quarter of 2019, after a record-breaking summer for traffic.

“It was the busiest summer in our history,” said CEO Ed Bastian. That translated into operating revenue of $12.6 billion for the quarter ended in September. That’s up 5% from a year earlier and the highest quarterly tally in Delta’s history. The company’s quarterly net income of $1.5 billion was up 13% year-over-year.

But the airline also struggled through weather disruptions, including hurricanes, which drove up its labor costs with employees working overtime. Operating expenses for the quarter were $10.5 billion, up 2%, with salaries and related costs growing by 5%.

“We can do a better job going forward,” Bastian said. “We’re going to increase our investment in our people, hiring sooner.” He added that the company needs to hire at a rate of 5,000 to 7,000 people a year, including pilots, flight attendants, mechanics, airport agents and reservations agents.

Bastian said the company expects to report another year of more than $5 billion in profit for 2019, which it typically measures in pretax income.

This year, Delta gained more customers in part because its competitors had to cut flights due to the grounding of the Boeing 737 Max after two crashes overseas.

But next year could bring some uncertainty for Delta, when competitors including Southwest and American bring the 737 Max back into service pending Federal Aviation Administration clearance.

That could bring heightened competition that some have speculated could spark fare wars as airlines that operate the 737 Max work to attract more passengers.

Bastian said, “We look forward to competing against the Max.”

“I don’t think the Max being out is good for any of us,” he said, but added: “The customers that have come over to Delta have experienced the Delta-style service. I expect many of them will stay with Delta.”

Internationally, Delta faces challenges. Revenue in Asia was down as tariffs on automotive and manufacturing sectors drove down corporate travel, while there was also a decrease in vacationers from China.

Delta also faces the impact of 10% tariffs on Airbus aircraft it has on order, which the U.S. government announced after it prevailed in a dispute over European Union subsidies to Airbus.

The tariffs will apply to aircraft as they are being delivered, Bastian said. “We have expressed our concerns that this is kind of a retrospective tariff on decisions made in the past,” he said, adding that the airline is examining its options to mitigate the impact.