Delta: Government Shutdown Hurting Revenue

Delta Air Lines Inc. (NYSE: DAL) is warning that the prolonged partial shutdown of the government is beginning to hurt profits. Chief Executive Officer Ed Bastian said that the shutdown will cost the airline about $25 million per month because of the reduced government travel and other related effects. That $25 million equates to about a 1 percent drop in expected revenue for the company.

The partial shutdown came about as the result of conflict between President Donald Trump and lawmakers over funding to build a barrier wall along the U.S. border with Mexico. The shutdown, which started on December 22, has entered its fourth week and is now longest on record. The shutdown affects about a quarter of the federal government and about 800,000 government employees have been furloughed or are working without pay.

The company having difficulties introducing new aircraft to its fleet because the FAA is one of the agencies with non-essential personnel furloughed during the shutdown. The company had planned a January 31 start date to begin using its Airbus 220 airplanes and was going to begin the commercial use of other jets such as the Airbus A330neos. Bastian said in his comments, “The start date is likely to be pushed back due to delays in the certification process. This is also hampering our ability to put seven other new aircraft deliveries into service.”

Delta said that the effects of the partial government shutdown, along with currency headwinds and a later Easter this year, will lower its revenue for the first three months of the year. Delta is now forecasting first-quarter earnings of between 70 cents and 90 cents per share. That is below Wall Street analysts’ estimate of 94 cents. Delta is also predicting that its unit revenue will range between flat to 2 percent higher in the first quarter, considerably lower than its 3.2 percent growth in the fourth quarter.

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