Delta: Airport blackout, storm cost $60 million
Posted January 12, 2018 1:47 p.m. EST
ATLANTA -- Delta Air Lines racked up $60 million in losses from the combined impact of the massive Atlanta airport power outage and the winter storm that brought snow to the area in early December.
With its largest hub in Atlanta, Delta's finances took substantial hits last month when winter storm Benji hit the Southeast, costing the airline $20 million. Then, just more than a week later, a major power outage at Hartsfield-Jackson International took a $40 million toll.
Delta CEO Ed Bastian told The Atlanta Journal-Constitution after the Dec. 17 power outage that he planned to seek reimbursement for losses from Georgia Power or the Atlanta airport. Asked about that this week, he said, "We'll have the conversations at the appropriate time with those parties."
Current talks involve "making certain that we learn from the experience" to ensure it doesn't happen again, and "putting in the right design and structure both in the short and long term to protect our power source," Bastian said during a conference call on the company's financial results and outlook.
During the 11-hour power outage at the world's busiest airport, flights were halted and tens of thousands of travelers were left stuck in dark terminals and concourses with little information about what happened and when the lights would come back on. Some passengers were stuck on planes on the tarmac for hours.
Hartsfield-Jackson general manager Roosevelt Council told an Atlanta city council transportation committee Wednesday that he wants to set up a system of emergency generators powerful enough to keep the airport's concourses in operation. Yet to be seen is how much that will cost and who will pay for it.
Regarding reimbursement to Delta for its lost revenue during the outage, Georgia Power said this week: "We understand and apologize for the inconvenience the outage caused thousands of travelers. However, we cannot and do not guarantee uninterrupted electric power service."
Delta reported nearly $3.6 billion in net income in 2017. That's down 18 percent year-over-year from nearly $4.4 billion in 2016.
The airline also faced rising fuel costs in 2017 and $475 million of expense from a new pilot labor contract, which included immediate raises of 18 percent.
Despite that, in his remarks to analysts, Bastian painted an optimistic financial picture for the airline.
Delta expects to see benefits from tax reform this year, which should partially offset increases in fuel costs. The airline currently doesn't pay federal income tax because of accrued net operating losses, from years of financial struggles, which offset its income today. That will change starting in 2019, and the airline expects its tax rate to be 22 percent to 24 percent, with an $800 million benefit from tax reform.
The airline's focus for 2018 is to cut back on increases in unit costs -- the cost to fly one seat one mile -- bringing them "back in line with our long-term 0 to 2 percent target," said Delta's chief financial officer Paul Jacobson.
The company still expects to pay out $1 billion in profit sharing to employees next month. But, while other companies have been paying out tax reform bonuses to employees, that does not appear to be in the offing for Delta employees.
"We have a sustainable profit sharing plan over the long term that has been far superior to any cash bonuses that any of the other have given out," Bastian said. "That's how we pay our employees."
Tax reform had a separate immediate impact on Delta's earnings: The airline had to record a onetime charge of $150 million to account for foreign earnings and deferred tax assets and liabilities.
One analyst asked Delta executives during Thursday's conference call whether the federal government might begin allowing airlines to charge passengers fuel surcharges on domestic flights -- a practice that is banned today.
Delta chief legal officer Peter Carter said, "We haven't given that particular issue much thought," but he called it an "interesting question."
"There's no question that the Trump administration has been very open to the airline industry in general," he said, "and I think, quite frankly, business."
Kelly Yamanouchi writes for The Atlanta Journal-Constitution. Email: kyamanouchi(at)ajc.com.
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