Delta looks at faster hiring to meet 'surprise' demand, costs rise

CHICAGO (Reuters) - Delta Air Lines <DAL.N> reported a bigger-than-expected increase in third-quarter profit on Thursday thanks to "surprise" demand growth, prompting a need to hire pilots, flight attendants, and airport workers more quickly, Chief Executive Ed Bastian told Reuters.

Delta's pilots received record overtime this summer, in part because the airline added more flights to fill a supply gap left by the grounding of the Boeing 737 MAX at rival carriers, Reuters reported on Wednesday.

That contributed to higher expenses in the quarter, a trend Bastian said would continue this year and into 2020.

"The size of the demand surprised us," Bastian said in a telephone interview.

Delta's cost per available seat mile, excluding fuel costs, rose 2.4% in the third quarter due to higher employee wages, demand volume and weather incidents.

Shares in Delta slipped in premarket trading. Unlike its main U.S. competitors, Delta does not own the 737 MAX, which has not flown since a worldwide grounding in March that is forcing more than 100 daily flight cancellations at Southwest Airlines <LUV.N> and American Airlines <AAL.O>. As a result, Delta is increasing its flight capacity while growth at rivals that own the 737 MAX remains stuck. It is forecasting capacity growth of around 4.5 percent in the fourth quarter. "Given the high volume that we've experienced and the demand for the product, it's created a need for additional resources across all of our work groups (...) and getting this staffing in sooner," Bastian said. Net income rose 13.1% to $1.5 billion in the quarter to Sept. 30 on total adjusted revenue of $12.56 billion. Adjusted earnings per share reached $2.32, beating analysts' expectations for profit of $2.26 per share, according to IBES data from Refinitiv. Analysts were forecasting revenue of $12.6 billion The airline, the first of its peers to report quarterly earnings, is among the U.S. airlines hardest hit by a new 10% tariff on European-made Airbus <AIR.PA> planes. Bastian said the tariff is not expected to have an impact this year because its remaining Airbus deliveries will come from the European planemaker's plant in Mobile, Alabama, which is exempt from the levy. Delta is "looking at all of our options to make sure that we don't incur any increases to our already negotiated prices with Airbus" for deliveries due next year, Bastian said. Last month, Delta pledged to buy 14 more A350s, which are assembled in Europe, as part of a strategy to grow in Latin America through the acquisition of a 20% stake in LATAM Airlines Group. The airline is also still targeting an investment of around 100 million euro ($109.80 million) in the rescue of Italian flagship carrier Alitalia, Bastian said.

(Reporting by Tracy Rucinski; Editing by Sandra Maler and Jane Merriman)

10/10/2019 12:42

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