Delta reports a profit despite its service meltdown

New York (CNN) — Delta Air Lines reported a profitable third quarter, as the airline weathered a $500 million hit from a July service meltdown related to the CrowdStrike computer outage, as well as the impact of Hurricane Helene at the end of the quarter.

The airline had to cancel about 7,000 flights over the course of a week in July due to problems with its crew tracking software caused by a flawed software update from cyber security firm CrowdStrike.

While the software issues affected airlines around the globe, Delta took much longer than its competitors to fix the problems, causing it to take a $380 million hit from lost revenue from canceled flights, and another $170 million in increased costs to compensate customers and extra staffing costs. That was partly offset from a $50 million fuel savings due to the grounded flights.

Delta said it earned adjusted income of $971 million in the quarter, down 26% from a year earlier, on adjusted revenue of $14.6 billion in the quarter, essentially unchanged from a year ago, despite the hit to revenue from the service meltdown.

The airline also had to contend with slightly lower average fares in the quarter, a trend across the industry, as the amount passengers paid to fly each mile on average fell by 3%. But that was offset by a 3% increase in miles flown by passengers, as passengers soon returned to travel on Delta despite the service problems. And it reported a 9% drop in average fuel prices paid, the second largest cost at the airline behind labor costs.

The airline also said it expects a strong holiday quarter, as it forecast a 30% rise in earnings to give it one of its most profitable quarters in its history. Early bookings for the holiday period are strong, although the airline said it expects a slowdown in travel in early November related to the US election.

“We can see it in our booking data. October is doing well. We can see the discrete period a week or two before the election, a week or two after the election as being a little bit of a pause,” said Bastian on CNBC. “It makes sense if you think about it with all the uncertainty.”

Bastian said he people tend not to want to travel during the election period, and people don’t want to spend money they don’t have to until they know the election outcome.

“I think you’re going to see it across consumer discretionary purchases as a whole,” “People want to find out what happens. They don’t like uncertainty. We’ve seen it in past elections. The good news is Thanksgiving looks really strong. Christmas looks really strong.”

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