Delta CEO Ed Bastian acknowledged that “a lot of our customers are priced out of our products.” He said the airline plans to add more flights to Atlanta and some other hubs in coming months, which he said would bring back “more affordability.”
The move comes amid a resurgence in travel this year from COVID-19 pandemic lows. The volume of passengers overwhelmed Delta and other airlines, with pilot staffing issues and labor shortages driving mass cancellations and flight disruptions. In response, Delta said it would cut back flying for the summer, and then in July said it would halt flight growth for the rest of the year to limit cancellations.
The constriction of the supply of flights combined with continued strong demand for travel meant that air fares soared.
Delta flew 17% less capacity in the third quarter than it did in the same period of 2019, yet brought in 3% more revenue, boosted by those higher fares.
That had a particularly strong effect in Delta’s home region, the airline’s president Glen Hauenstein acknowledged.
He said Delta choked off flows of traffic in “very key markets where Delta has historically been the leading carrier, particularly in the Southeast.”
Travelers “in a lot of cases couldn’t get fares that were competitive on Delta because we didn’t have the seats to produce them,” Hauenstein said.
Federal data show that average Atlanta domestic air fares reached $339.85 by the first quarter of this year, up 34.3% year-over-year — a bigger increase than the national average.
Hartsfield-Jackson general manager Balram Bheodari said the Atlanta airport probably would have seen traffic recover to near 2019 levels this year “had it not been for staffing challenges and reduction in flight schedules.”
A key reason is that so far, Delta has restored more flights to hubs in New York and Los Angeles than to Atlanta, according to Bastian.
Atlanta is a “fortress hub” where Delta controls about 80% of the market. But New York and Los Angeles each have multiple major global carriers with large operations competing for customers, and Bastian said those are “strategic areas we wanted to make sure we protected.”
As a result, flight capacity was 20% less restored in hubs like Atlanta compared to other Delta hubs along the coasts that have had flights fully restored or are growing. The goal “was to improve our competitive position in the coastal gateways,” Hauenstein said.
“That said, Atlanta is going to be the focal point of our growth over the next six to nine months” in preparation for next summer, Bastian said. He said nearly half of Delta’s planned domestic growth will touch Atlanta. “It’s going to be good for the city,” he said.
Bookings for the fourth quarter including the holidays “look really strong,’ Bastian said. “Business is continuing to come back.”
Delta’s $695 million in net income was down by nearly half from $1.21 billion reported by Delta for the third quarter of 2021. But in that year-ago quarter, the company benefited from $1.8 billion in government relief funding.
Delta’s revenue in the third quarter of 2022 was up more than 50% from $9.2 billion a year earlier.
But its operating expense nearly doubled to $12.5 billion from a year ago, with salaries and related expenses up 18.9%, aircraft fuel expense more than doubled and other increased expense.
The airline took a $70 million hit from Hurricane Ian in late September, which caused multiple airports in Florida to temporarily halt operations. The Fort Myers airport, where Delta is the largest carrier, was damaged and didn’t reopen until Oct. 5. It didn’t have drinking water until Oct. 11, when a boil water advisory was lifted.
Across multiple airports in the storm’s path, “it was a series of disruptions” that drove flight cancellations, said Delta CEO Ed Bastian. Ian took a $35 million toll on Delta’s financial results in the third quarter. Ian has also led to reduced flight bookings to affected destinations in Florida and Bastian expects the hurricane effects to take another $35 million bite out of Delta’s results for the October-December quarter.
Looking forward, Delta plans to restore its flight capacity back to 2019 levels by summer 2023. Bastian said the airline had been planning on a recovery taking two to three years.
“It’s how we looked at our pilot staffing and pipeline,” he said. That more conservative approach meant that when travel rebounded strongly this year, it took Delta by surprise and the airline did not have enough pilots hired and fully trained on specific aircraft to staff a fully restored schedule.
Bastian said his priority is “to make sure by next summer we can fly our full summer schedule” with enough staff and reliability.
Amid concerns about a potential recession, Bastian said: “We’re aware of some macro-headwinds out there,” Bastian said. “If the demand is not all the way back, we have the tools to manage that back down a bit.”
Delta’s third quarter net income
Q3 2022: $695 million profit
Q3 2021: $1.21 billion profit
Q3 2020: $5.38 billion loss
Q3 2019: $1.5 billion profit
Q3 2018: $1.32 billion profit