Delta Air Lines reported a profitable third quarter, despite facing a $500 million hit from a July service meltdown related to a CrowdStrike computer outage and the impact of Hurricane Helene at the end of the quarter. The airline had to cancel about 7,000 flights over a week in July due to problems with its crew tracking software caused by a flawed software update from CrowdStrike. While the software issues affected airlines globally, Delta took longer to fix the problems compared to its competitors, resulting in a $380 million hit from lost revenue and $170 million in increased costs. However, a $50 million fuel savings helped offset some of the losses.
Delta announced an adjusted income of $971 million in the quarter, a 26% decrease from a year earlier, with adjusted revenue of $14.6 billion, essentially unchanged from a year ago despite the service meltdown. The airline experienced slightly lower average fares in the quarter, with passengers paying 3% less per mile on average. However, a 3% increase in miles flown by passengers helped offset this decline. Additionally, a 9% drop in average fuel prices paid was reported, which is the second largest cost at the airline after labor costs.
Despite the challenges faced in the third quarter, Delta is expecting a strong holiday quarter and forecasts a 30% increase in earnings, potentially making it one of the most profitable quarters in the company’s history. Early bookings for the holiday period are strong, although the airline anticipates a slowdown in travel in early November due to the US election. Delta CEO Ed Bastian stated that there is a noticeable pause in travel around the election period, as people tend to wait until the uncertainty is resolved before making travel and discretionary spending decisions.
Bastian mentioned that the airline can see the impact of the election on their booking data, with a strong October followed by a slowdown in the week or two before and after the election. People generally avoid travel during the election period and prefer to wait until the outcome is known before making significant financial decisions. Despite the temporary slowdown related to the election, Delta is optimistic about the holiday season, with Thanksgiving and Christmas bookings looking strong. Consumer discretionary purchases as a whole may be impacted by the election uncertainty, but the airline remains positive about the upcoming holiday period.
Overall, Delta Air Lines navigated through a challenging third quarter with strong financial results despite the setbacks caused by the July service meltdown and Hurricane Helene. The airline’s ability to offset losses, lower average fares, and anticipate customer behaviors during the election period demonstrates its resilience and strategic planning. With expectations of a highly profitable holiday quarter, Delta remains optimistic about the future and continues to focus on providing safe and reliable service to its passengers.
