Delta Air Lines
has published its Q3 results, with the airline managing to post a $1.2 billion net income for the quarter that was affected by the global CrowdStrike IT Outage
, which resulted in the airline canceling over 7,000 flights over several days in July.
Continuing to lead the industry
Ed Bastian, the chief executive officer (CEO) of Delta Air Lines, thanked the airline’s employees for their work during the quarter, saying that the carrier has continued to lead the industry operationally and financially.
“In recognition of the outstanding efforts of our employees this year, we have accrued almost $1 billion of profit sharing towards the upcoming February payout.”
Bastian highlighted that with an improving industry backdrop and strong demand for the airline’s flights, Delta Air Lines was positioned to finish the year strong.
As such, the CEO shared that the carrier expected its pre-tax profit to grow 30% year-on-year (YoY) in Q4, making it one of the most profitable final quarters of the year in its history.
Photo: Delta Air Lines
The airline estimated that its total Q4 revenues would range from $13.9 billion to $14.2 billion, a 2% to 4% improvement YoY, while its operating margin would be between 11% and 13%.
Its capacity, measured in available seat miles (ASM), should grow by 3% to 4% YoY, while costs per ASM, excluding fuel (CASM-ex), should increase 3% YoY.
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Reflecting back on the IT outage
Nevertheless, in late July, CrowdStrike, a cybersecurity software provider, updated its systems, causing a global IT outage that lasted from July 19 until at least July 29, according to the company. By the latter date, 99% of Windows sensors were online on a week-on-week basis, CrowdStrike said at the time.
Photo: Ian Dewar Photography | Shutterstock
While airlines, including major US carriers, had managed to recover their operations within a day or two, Delta Air Lines continued to cancel flights until at least July 31, according to one lawsuit filed by disgruntled passengers.
As a result, its total revenue, ASM, and total revenue per ASM (TRASM) were 2.6%, 1.5%, and 1.1% lower YoY, respectively, while CASM-ex went up by 3.2%.
“The direct revenue impact of the incident was approximately $380 million, primarily driven by refunding customers for cancelled flights and providing customer compensation in the form of cash and SkyMiles.”
Delta Air Lines’ financial statements for the quarter detailed that during the three-month period, it had lost $221 million in cash, ending Q3 with cash, cash equivalents, and restricted cash equivalents of $4.2 billion.
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The carrier unquestionably took a hit to its third-quarter performance, but does not expect it to make a major dent in its full-year earnings.
Improving profitability
Despite the week-long flight disruptions that were exclusive to the airline, Delta Air Lines managed to improve its net profit, which grew to $1.2 billion compared to $1.1 billion in Q3 2023.
During the first nine months of 2024, Delta Air Lines achieved a net income of $2.6 billion, a slight improvement compared to the $2.5 billion of net income it earned during the corresponding period in 2023.
The net income in Q3 came despite the 30% drop in operating income – from $1.9 billion in Q3 to $1.39 billion – primarily driven by non-operating income/expenses. While in Q3 2023, non-operating expenses were $463 million, in Q3 of this year, the airline booked a non-operating income of $164 million.
Photo: Vincenzo Pace | Simple Flying
Furthermore, the quarter’s tax provision was $124 million lower YoY, allowing the airline to improve its net income and earnings per share (EPS) to $1.98.
Lower fuel costs had also lent a helping hand to Delta Air Lines, with the airline’s Q3 report indicating the average fuel price per gallon being 9% lower YoY.
Still, yields, passenger revenue per ASM, and TRASM (adjusted) were all lower during the quarter and the nine months up to September 30.
Considering that Delta Air Lines was estimating growing revenues in Q4 – passenger revenues were $12 million lower in Q3 YoY – this could have been a temporary blip caused by the CrowdStrike outage.
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