Delta will distribute more than $1 billion in profit sharing on Valentine’s Day. KENT D. JOHNSON /

Delta posts big profit despite drag at year’s end

Delta Air Lines reported a nearly $4.4 billion profit for 2016, down slightly from $4.5 billion a year earlier as the carrier faces pressures from higher fuel costs and pay increases to pilots and other employees.

The result will produce more than $1 billion in profit sharing for employees, Delta CEO Ed Bastian said. Payouts are scheduled for Feb. 14, Valentine’s Day.

Delta has close to 30,000 employees based at its Atlanta headquarters and hub, and its payroll ripples across the metro economy.

Despite the strong annual result, Delta’s fourth quarter profit fell 37 percent, primarily due to a new pilot labor contract with immediate 18 percent pay raises. It had $622 million in net income in the quarter, down from $980 million a year earlier.

Delta’s unit revenue — the amount generated from each seat-mile flown — also has been weak amid stiff competition from other airlines.

Total fourth-quarter operating revenue dipped $44 million, to about $9.5 billion. Unit revenue declined 2.7 percent.

Meanwhile, operating costs rose 8 percent in the quarter, including $475 million of new expense from the pilot contract, which included raises retroactive to Jan. 1, 2016.

For the full year, operating revenue declined 3 percent to $39.6 billion, while operating expense fell 1 percent. However, Delta said it expects unit revenue to turn positive this year after two years of declines.

The airline said business travel demand improved after the November election.

For now, the company plans to “remain conservative” and limit growth, Delta president Glen Hauenstein said. Delta plans for an up to 1 percent cut in flying in the first quarter of this year, compared with a year ago.

The 2016 profit result matched Delta’s projection in December, when Bastian said 2017 will be a “transition year.”

He said then that rising costs, including an expected increase in fuel prices, will “test the business model” for the airline.

Bastian also said he’s excited about the potential for increased investment in airport infrastructure under the incoming administration of President-elect Donald Trump.

In remarks to analysts and reporters Thursday, Bastian said Delta has “provided some input to the transition team.” He said he’s “excited about the opportunity” to present Delta’s case on competition with Middle East carriers and on enforcing trade deals, and discuss tax benefits and regulatory changes, calling it “a pretty good list of opportunities.”

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