Delta sales rise on gains in leisure market
Furlough of FAA inspectors also slows airline’s introduction of new Airbus planes
Delta Air Lines Inc. forecast sluggish revenue growth early this year in part because of business lost to the federal government shutdown.
The Atlanta-based carrier said Tuesday that it expects firstquarter unit revenue—a key industry metric—to be flat or rise at most by 2% as federal workers travel less during the spending fight between the Trump administration and Congress.
Chief Executive Ed Bastian said the shutdown would cost Delta this month about $25 million in revenue from government travel. The airline also attributed its tempered outlook to a stronger U.S. dollar and to the timing of this year’s Easter holiday in April, which pushes a busy travel period beyond the first quarter.
Delta’s shares were off about 1% in afternoon trading, adding to a 4% decline this year through Monday.
Investors have sent airline stocks lower in recent weeks as Delta and American Airlines Group Inc. signaled revenue for late 2018 was coming in below expectations.
On Tuesday, Delta said its unit revenue, which measures how much an airline makes per seat mile flown, grew 3.2% in the fourth quarter; that was slightly above the increase Delta forecast earlier this month, though still below a previous expectation. After a sharp increase in fuel prices last year, prices have eased recently, raising concerns that airlines might compete for passengers by lowering fares or quickly adding flights. Analysts are now watching how well carriers adjust capacity growth plans and weather the government shutdown.
Delta said its employees are helping Transportation Security Administration workers to move passengers through crowded checkpoints. Unscheduled absences among TSA workers on Monday were more than double the rate on that date a year earlier, according to the agency. Delta’s big hub in Atlanta saw some of the longest delays nationwide, according to TSA data. “In isolated airports we’re having some longer lines, but it’s not a systemwide issue at all,” Mr. Bastian told analysts and reporters on Tuesday.
He said passengers who had missed flights due to long lines were placed on other flights.
The shutdown is hampering Delta’s investment plans. The airline needs approval from Federal Aviation Administra- tion officials before it can start service on its new Airbus A220s, and Mr. Bastian said that launch would likely be delayed because FAA inspectors have been furloughed during the shutdown.
Delta had planned to start putting the planes into service later this month and introduce them throughout the year on business routes, touting the aircraft’s wider coach seats, big overhead bins and other passenger-friendly amenities.
Other airlines are also putting operational plans on hold. Southwest Airlines Co. said Monday that it isn’t clear when it will be able to start flying to Hawaii. Officials overseeing Southwest’s application for certification to fly long distances over water aren’t working during the shutdown, delaying the next steps.
Overall for the fourth quarter, Delta said its sales increased 5% from a year earlier to $10.74 billion. Analysts polled by FactSet were expecting $10.72 billion. Revenue from domestic flights increased 8% to $7.07 billion.
Revenue from trans-Atlantic flights drove a 7% increase for Delta’s international business. Latin American sales increased 4% and sales for flights over the Pacific gained 1%.
Profit for the fourth quarter totaled $1.02 billion, or $1.49 a share, compared with $299 million, or 42 cents a share, a year earlier. Adjusted earnings of $1.30 a share surpassed the $1.28 a share analysts polled by FactSet expected.
Delta’s operating expenses rose 6% to $9.65 billion in the fourth quarter. The company’s aircraft fuel bill and related taxes jumped 29% to $2.32 billion. Salaries rose 8% to $2.74 billion.