sky

Delta forecast Q1 profit short of Wall Street’s estimates, dragging down the carrier’s shares as higher costs deal a blow to its efforts to further capitalize on a rebound in air-travel demand. Adjusted earnings will be 15 to 40 cents a share in the period, the airline said Friday in a statement that also detailed fourth-quarter results. Unit expenses this quarter, excluding fuel, will climb as much as 4% from a year ago, a forecast that Delta said includes “expected labor cost increases” and impacts from network rebuilding. Analysts had predicted an adjusted per-share profit of 54 cents on average, according to estimates compiled by Bloomberg. At least some analyst estimates did not incorporate the elevated costs. The outlook contrasts with Delta’s better-than-expected fourth-quarter results, suggesting a choppy travel recovery amid financial pressures and questions about consumer confidence. Leaders of the largest US airlines have remained bullish in their expectations that passengers will continue to pack planes as air travel returns from an early-pandemic slump. Even as Delta warned of cost pressures Friday, CEO Ed Bastian said “the industry backdrop for air travel remains favorable” in 2023. The carrier’s rising expenses are due in part to a proposed four-year contract with pilots calling for at least 34% in cumulative pay hikes. The union is finalizing language in a preliminary agreement before leadership decides whether to send it to pilots for a vote. In addition to labor, Delta is also grappling with costs related to work to rebuild its pandemic-reduced network ahead of peak summer travel. Costs for each seat flown a mile, a measure of efficiency, will fall 2% to 4% for the full year versus 2022, compared to the airline’s earlier view of a drop of as much as 7%.<br/>

Delta CEO Ed Bastian called on Washington to increase funding for the Federal Aviation Administration after an outage of a pilot alert system that grounded thousands of flights across the US this week. The FAA halted US flight departures on Wednesday morning after it reset the Notice to Air Missions system, which had failed from a corrupted data file. More than 10,000 flights were delayed or canceled that day as as a result. “Over the past 36 hours, the FAA has been conducting a preliminary analysis into the NOTAM system interruption,” the FAA said late Thursday. “The agency determined that a data file was damaged by personnel who failed to follow procedures.” Delta’s Bastian called the incident “unacceptable.” “It was a difficult day on Wednesday for our customers as well or our own employees. And candidly, it’s unacceptable” he said. “I don’t recall us ever shutting down the national air space due to a similar type of technology outage for several hours.” But, he said, the issue “is not the FAA’s fault.” “I lay this on the fact that we are not giving them the resources, the funding, the staffing, the tools, the technology they need,” he said. “Hopefully this will be the call to our political leaders in Washington that we need to do better.” Lawmakers from both sides of the aisle expressed frustration with the outage and resulting travel chaos. Congressional hearings are likely to follow.<br/>

Delta Air Lines plans to hold back on restoring its flight network to China as it assesses demand following that country’s lifting of all Covid-19-related travel restrictions earlier this month. Ed Bastian, CE of the Atlanta-based airline, said on 13 January that the carrier’s international recovery is “well underway”. But while Delta is seeing “robust bookings” for the coming months on its transatlantic routes, Bastian adds the company is wary about overstretching itself across the Pacific. “We are really excited about summer peak season, we think it’s going to be a record-breaker,” he says. “What’s left to reopen is China. We’re not going to get ahead of ourselves, we will be mindful to see what demand warrants.” Prior to the pandemic, the airline operated flights to China from Atlanta, Detroit, Seattle and Los Angeles, according to Cirium data. China lifted all coronavirus-related travel restrictions on 8 January after almost three years. That opening follows a broader North Asia reopening in late 2022, which saw neighbouring North Asian countries such as Japan, South Korea and Taiwan drop their restrictions. Almost immediately, Chinese carriers announced they would expand their schedules to North America to take advantage of what they expect will be pent-up demand for overseas travel. On 4 January, Air China and Hainan Airlines submitted new schedules to the US Department of Transportation (DOT) with their expanded route intentions. US airlines have not been as gung-ho about restoring China flights. Currently only four airlines – Air China, China Eastern Airlines, China Southern Airlines and Xiamen Airlines – operate nonstop flights between China and the USA, according to Cirium data. <br/>

Two of China’s largest state-owned airlines said they would give up their New York stock exchange listings, joining a raft of government-controlled firms that announced their departures from US bourses last year. China Eastern Airlines and China Southern Airlines stated in separate filings on Friday their intentions to apply to voluntarily delist their American depositary shares listed on the New York Stock Exchange. The companies attributed the decision to commercial factors, including the costs of maintaining a US listing despite the smaller number of shares and trading volumes in the US relative to those in Hong Kong. The delistings have occurred despite US officials signaling a breakthrough last month in a long-running spat with China over access to audit papers, reducing the threat of forced delisting for Chinese firms. The Public Company Accounting Oversight Board said in December that the US regulator’s inspectors have been able to sufficiently review audit documents from firms based in the two jurisdictions, a progress which was applauded by Chinese regulators. Analysts previously anticipated that state-backed airlines would be next to depart from US exchanges, following similar decisions from China Life Insurance Co., Petrochina Co., and three other state-owned giants in August. Both China Eastern and China Southern are controlled by the Assets Supervision and Administration Commission of the State Council (SASAC), the same entity that oversees the firms that were delisted last year. The carriers were among the Chinese companies identified by the US Securities and Exchange Commission as potentially facing delisting in 2024. The airlines believe that their listings in Hong Kong and Shanghai are sufficient alternatives for their future financing needs, while their ADR listing has never been used for follow-on financing, their filings said.<br/>

Boeing’s 737 Max finally returned to commercial service in China after a nearly four-year absence, a major boost to one of America’s top exporters in its most important foreign market. China Southern, the country’s largest airline, operated the service Friday using the first 737-8 Max that Boeing delivered to it in November 2017. A Chinese airline hadn’t flown passengers on a Max since the model was grounded in March 2019 following crashes in Indonesia and Ethiopia that killed 346 people. The flight took off from Guangzhou at 12:45 p.m. local time, heading to Zhengzhou, according to tracking data from FlightRadar24 and VariFlight. That’s about a 2 1/2-hour journey. No other Chinese airlines have scheduled Max services yet. Boeing’s best-selling aircraft is now flying again in the world’s major markets aside from Russia. China, the first country to ground the Max after the Ethiopia disaster, approved its return to service in December 2021, saying it was satisfied with updates to software linked to the crashes. But Chinese airlines refrained from rushing the Max back amid strained US-China relations. China took about a third of the 737 jets that Boeing built in the years before the grounding. The nation’s top carriers — China Southern, Air China, and China Eastern — are all Max customers, along with about 10 others. The Max will likely be needed to help meet a surge in demand after China ended its Covid travel restrictions and reopened its borders. The volume of flights within China — the biggest domestic air travel market in the world — has recovered to 98% of pre-Covid levels since the curbs were eased, according to VariFlight data.<br/>