Government shutdown to cost Delta $25M in January

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Because of the shutdown, Delta's debut of the Airbus A220 will be delayed. Furloughed FAA inspectors aren't able to complete certifications.
Because of the shutdown, Delta's debut of the Airbus A220 will be delayed. Furloughed FAA inspectors aren't able to complete certifications.

The partial federal government shutdown, now in its 25th day, will cost Delta Air Lines an estimated $25 million in January, said CEO Ed Bastian during the carrier's fourth-quarter earnings call on Tuesday.

The shutdown also will delay Delta's debut of the Airbus A220 in the U.S.

The $25 million setback is due to a reduction in travel by federal employees as well as related losses, such as a cutback in leisure travel by federal workers who aren't receiving pay and the cost of any operational difficulties that the shutdown is causing. 

The figure would increase by orders of magnitude if the shutdown were to last through ensuing months, said Bastian. But he noted that corporations don't appear to be altering their travel spending yet. 

"We're not seeing evidence that people are looking at this extended shutdown as anything other than something that is going to be solved soon," Bastian said. 

Despite long lines at TSA security checkpoints in Delta's Atlanta hub on Monday, Bastian said that operational impacts from the shutdown have thus far been minimal. 

Regarding the A220, furloughed FAA inspectors aren't able to complete certifications.

"We are not going to be canceling routes or flights. We'll just delay the introduction of that specific aircraft type," Bastian said.

Delta had planned to put its first Airbus A220-100s into service Jan. 31 on New York LaGuardia-Boston and LaGuardia-Dallas/Fort Worth routes. The carrier has thus far taken delivery of four of the fuel-efficient 109-seat aircraft, which it will use to replace aged Boeing 717s. 

Delta said the shutdown could delay service introduction of seven aircraft because furloughed FAA inspectors aren't able to complete certifications. Along with A220s, Delta said the shutdown could delay launch of twin-aisle Airbus A330-900neos. Inspectors need to certify various components of new aircraft, including seats and the WiFi system, said chief operating officer Gil West. 

Delta reported fourth-quarter net income of $1.02 billion, up from $299 million in 2017. Much of the increase was due to the $420 million reduction in Delta's tax burden that resulted from the lower corporate tax rate that took effect last year. For the whole of 2018, Delta reported net income of $3.94 billion, up 23%. The company's pre-tax income of $5.15 billion lagged 6% behind 2017. 

Delta reported fourth-quarter operating revenue of $10.74 billion, up 5% year over year but $30 million shy of analyst expectations, according to the website Seeking Alpha. For the year, Delta reported $44.44 billion in revenue, up 8% from 2017.

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