Delta 1Q Profit Down 36%; Recent Disruption to Cost $125 Million


Reading Time: 2 minutes

Delta Air Lines reported a first-quarter 2017 net profit of $603 million, down 36% from net income of $946 million in the prior-year period, as fuel prices rose sharply year-over-year.

The Atlanta-based carrier said it expects to take a $125 million hit in reduced pre-tax income in the second quarter from the 4,000 flight cancellations resulting from severe thunderstorms April 5 and the subsequent problems in operational recovery over several days related to crew displacement.

“The storms that hit us [April 5] had an impact that, in my 20 years at the airline, I’ve never seen,” Delta CEO Ed Bastian told analysts and reporters.

“There was a virtual shutdown of Atlanta for the better part of a day … We had crews that were diverted. We had crew rotations that were broken … We apologize and certainly take responsibility for making this better in the future … We were literally running the airline hour-by-hour in terms of where crews were and getting them back to where they needed to be.”

He added, “When we have snowstorms, we typically get out of the way. We were not able to get out of the way of this … The IT worked as designed. It got overwhelmed by the volume [of out-of-place crew]. The equipment worked throughout.”

Delta said its first-quarter adjusted fuel expense, which takes into account fuel hedging, increased $327 million compared to the same period in 2016, citing 52% higher market prices for fuel.

Delta’s first-quarter revenue was down 1% year-over-year to $9.1 billion, while expenses increased 5% to $8.1 billion. Operating profit was $1.1 billion, down 32% from operating income $1.5 billion in the 2016 March quarter.

Delta’s consolidated first-quarter traffic rose 0.5% year-over-year to 48 billion RPMs on an 0.5% decrease in capacity to 57.9 billon ASMs, producing a load factor of 82.9%, down 0.8 point. Passenger yield fell 1.4% to 16.3 cents.