Higher fuel costs and maintenance expense to cut into Delta profit

Credit: Miguel Martinez

Credit: Miguel Martinez

Delta Air Lines said high fuel costs and more money spent on maintenance to reduce flight disruptions will cut into its profits for the third quarter.

Fuel costs are up 30% since early July and have been “volatile all year,” said Delta Chief Financial Officer Dan Janki.

Maintenance expense is also up, due to increased investments in aircraft upkeep to reduce disruptions from maintenance delays, more heavy maintenance work on engines and supply chain issues.

During the summer, there were 30% more aircraft of out service than normal levels, according to Janki. “So to ensure that we deliver the reliability that our customers expect and we expect of ourselves, we’ve put a set of fleet maintenance activities in place,” he said. “We’re starting to move that needle.”

As a result of the increased maintenance and fuel costs, Delta cut its profit forecast for the third quarter to $1.85 to $2.05 in adjusted earnings per share, down from $2.20 to $2.50 per share in previous guidance.

But Atlanta-based Delta said its revenue is still strong, after a busy summer for vacations and trips to Europe, strong business travel into the fall and early holiday bookings.

While other airlines, including discount carriers, have voiced concerns about softer demand, Delta President Glen Hauenstein said “our customer generally is a customer with an average household income of over $100,000″ and record levels of savings with desires to spend their money on travel.

Corporate travel is increasing with more workers returning to the office, according to Hauenstein.

But the entertainment industry and Delta’s hub in Los Angeles is taking a hit from the actors’ and writers’ strike, he said.

Delta also has a hub in Detroit and “we’re also of course watching the automotive industry as we head into potential strikes there,” Hauenstein said.