Delta Air Lines Inc.
is hiring to avoid a repeat of the squeeze that affected its operations during the summer, adding to investor concern about rising carrier costs.
said Delta wanted to keep market share gains that were added during a peak season when flights were fuller than ever, intensified by the grounding of rivals’
737 MAX fleets.
Delta reported on Thursday quarterly earnings that beat forecasts, but its costs have been climbing this year as it absorbs increased staff overtime as well as the impact of several storms, and Mr. Bastian said this inflation was set to continue into 2020.
He said in an interview that Delta was short on pilots and flight attendants as well as airport and reservation staff heading into the summer and wants to avoid a repeat of the strain placed on employees and other resources.
“We’re going to increase our hiring,” Mr. Bastian said, with Delta headed for its 10th consecutive profitable year. “We want to make sure to get ahead to hold on to the gains.”
Delta, which this year overtook
as the world’s largest airline by traffic, doesn’t operate the 737 MAX. Mr. Bastian said the passenger spillover from rivals that use the jet and were forced to cancel flights added marginally to Delta’s business, but strong underlying growth and marketing of its premium products drove the most gains.
Atlanta-based Delta said its cancellation rate hit a record low in the quarter, but its pilot union called this summer a “perfect storm,” with the airline hit by a shortage of flight crew and strict work rules as it chased more business. The union wants Delta to hire 1,000 more pilots by next summer.
While Delta didn’t give details on how many additional staffers it planned to hire, it expects unit costs excluding fuel in the first quarter of next year to be a percentage point higher than its long-term target of a 2% increase. Expenses rose 2.4% in the September quarter compared with a year earlier and are expected to rise by 4% to 5% in the final three months of 2019.
While U.S. airlines are reporting near-record profits and demand remains strong, investors still fret about rising costs and the possibility of fare wars when the 737 MAX returns to service, which most operators expect early next year.
Delta has one of the industry’s strongest balance sheets, but its cost challenge is exacerbated by a $14 billion order book of
jetliners. The U.S. plans to slap a 10% tariff beginning Oct. 18 on aircraft made in the European Union following a long-running row over government subsidies for Airbus and Boeing jets.
Mr. Bastian said Delta wouldn’t be subject to any tariffs this year because planes due to be delivered were single-aisle jets assembled in Mobile, Ala. He said Delta was studying its options for larger, European-built A330neo and A350 jets due to arrive next year.
While Delta has been a small beneficiary of the MAX grounding, Mr. Bastian said the impact of the crisis would reverberate around the business. “There’s no question that we’re all going to learn,” he said. “It will make us safer as an industry.”
Delta reported net profit of $1.5 billion in the September quarter compared with $1.32 billion a year earlier. Per-share earnings rose to $2.32 from $1.93, 6 cents above the consensus among analysts polled by FactSet.
Delta shares are up about 8% so far this year.
Write to Doug Cameron at [email protected]
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