ATLANTA, Georgia: Delta Air Lines' third-quarter profit dropped to US$971 million, a 26 percent decline compared to last year, as the airline grappled with a global technology outage that caused widespread flight cancellations and signaled a potential slowdown in air travel demand.
The technology failure in July, which grounded 7,000 flights, cost the airline approximately $500 million in losses.
Despite the drop, Delta's CEO Ed Bastian expressed optimism for the final quarter of the year, forecasting a return to year-over-year earnings growth driven by strong holiday bookings. He noted that while there might be a temporary dip in travel spending before the November U.S. elections, demand for Thanksgiving and Christmas flights remains robust.
Delta's revenue for the quarter rose slightly to $15.68 billion, but expenses increased by 6 percent, particularly in labor and airport fees. Labor costs, which make up 30 percent of Delta's spending, surged 13 percent due to a new contract for union pilots and pay raises for nonunion staff.
Operating expenses outpaced revenue growth, contributing to the profit drop. Excluding special items, the airline earned $1.50 per share, slightly below analysts' expectations.
The technology outage, triggered by a software update from cybersecurity firm CrowdStrike, caused significant disruption. While other airlines quickly recovered, Delta faced longer delays, prompting an investigation by the U.S. Department of Transportation.
Delta lost $380 million in revenue from the canceled flights and incurred $170 million in additional expenses, primarily to reimburse passengers. However, the airline saved $50 million in fuel costs due to the cancellations. Delta is seeking compensation from both CrowdStrike and Microsoft, with legal teams involved in the dispute.
Looking ahead, Delta extended its transatlantic flights to capitalize on strong demand for travel to Europe.
However, Bastian noted a slight dip in bookings around the U.S. elections, a trend seen in previous election cycles. Delta expects fourth-quarter earnings to range between $1.60 and $1.85 per share, slightly below market expectations.
"It's a phenomenon we have seen over the last few national elections," Bastian said in an interview. "You're going to see people off decisions until they understand what the outcome of the election is. That can be whether it's going on a vacation or purchasing an appliance or making a home purchase."