Delta looks at faster hiring to meet 'surprise' demand, costs rise

Delta looks at faster hiring to meet 'surprise' demand, costs rise

Delta Air Lines reported a greater-than-expected increase in quarterly profit on Thursday thanks to "surprise" demand growth, prompting the airline to accelerate its hiring of pilots, flight attendants, and airport workers, Chief Executive Ed Bastian told Reuters.

FILE PHOTO: Delta Air Lines' incoming CEO Ed Bastian stands in front of a Bombardier CS100 air
FILE PHOTO: Delta Air Lines CEO Ed Bastian stands in front of a Bombardier CS100 aircraft during a news conference at Mirabel airport in Montreal, Quebec, Canada April 28, 2016.REUTERS/Allison Lampert/File Photo

CHICAGO: Delta Air Lines hopes to speed up the hiring of pilots, flight attendants, reservation and airport staff after "surprise" demand growth fueled better-than-expected third-quarter profit, Chief Executive Ed Bastian told Reuters.

However, that growth is driving up expenses, a concern for investors. Shares of Delta, which have outperformed major airline peers this year, sank 3.4per cent to US$52.06, after earlier dropping to US$51.07, its lowest since March 29.

Delta paid its pilots record overtime this summer as the carrier flew a heavy schedule, in part because of demand tapped from competitors that canceled flights due to the grounding of Boeing 737 MAX planes, Reuters reported on Wednesday.

"The size of the demand surprised us," Bastian said in a telephone interview.

Atlanta-based Delta does not own the 737 MAX, which has been grounded since March after two fatal crashes. As a result, it is able to increase flight capacity at a time when growth at MAX carriers like Southwest Airlines and American Airlines remains at a standstill.

Delta is forecasting capacity growth of around 4.5per cent in the fourth quarter, though costs per available seat mile, excluding fuel, are also seen rising between 4per cent and 5per cent in the period.

Costs, excluding fuel, rose 2.4per cent in the third quarter due to higher employee wages, demand volume and weather incidents, Delta said. "Given the high volume that we've experienced and the demand for the product, it's created a need for additional resources across all of our work groups (...) and getting this staffing in sooner," Bastian said.

Delta expects to retain the market share it picked up this summer, he told investors on a conference call. New hires will help meet larger travel volumes and keep cost inflation at around 2per cent over the longer term.Net income climbed 13.1per cent to US$1.5 billion in the quarter to Sept. 30 on total adjusted revenue of US$12.56 billion. Adjusted earnings per share reached US$2.32, beating analysts' expectations for profit of US$2.26, according to IBES data from Refinitiv. Analysts were forecasting revenue of US$12.6 billion.

For the fourth quarter, Delta expects earnings per share in the US$1.20 to US$1.50 range, below analyst estimates for US$1.51. The airline, the first of its peers to report quarterly earnings, is among the U.S. airlines hardest hit by a new 10per cent tariff on European-made Airbus planes. Bastian said the tariff is not expected to have an impact this year because its remaining Airbus deliveries will come from the European planemaker's plant in Mobile, Alabama, which is exempt from the levy. Delta is "looking at all of our options to make sure that we don't incur any increases to our already negotiated prices with Airbus" for deliveries due next year, Bastian said. Last month, Delta pledged to buy 14 more A350s, which are assembled in Europe, as part of a strategy to grow in Latin America through the acquisition of a 20per cent stake in LATAM Airlines Group. The airline is also still targeting an investment of around 100 million euro (US$109.80 million) in the rescue of Italian flagship carrier Alitalia, Bastian said.

(Reporting by Tracy Rucinski in Chicago; Additional reporting by Rachit Vats in Bangalore; Editing by Sandra Maler, Jane Merriman and Bernadette Baum)

Source: Reuters