Awaiting planes from Bombardier, airline says trade case against Canadian firm is weak
Delta Air Lines Inc. said it doesn’t expect to have to pay any tariffs on Bombardier Inc. jetliners it has on order despite recent U.S. trade action.
Trade officials in Washington have proposed tariffs that would potentially quadruple the price of Bombardier’s C Series planes for U.S. buyers after upholding a complaint from Boeing Co. that the Canadian aircraft maker benefited from unfair government subsidies. However, Delta Chief Executive Ed Bastian on Wednesday said Boeing’s case is weak and deemed it is unlikely tariffs will be imposed.
He said on an earnings call that initial deliveries from Delta’s 75-plane order slated for next spring could be de- layed as it works through the issues with Bombardier, but the airline still expects to pay the contractual price.
The tariff decision has fueled a trade spat between the U.S. and Canada, and Canadian Prime Minister Justin Trudeau said he raised the issue with President Donald Trump in a meeting at the White House on Wednesday.
Atlanta-based Delta has called for the case to be dropped, arguing that Boeing wasn’t harmed as it didn’t offer a competing jet. Canada and Montreal-based Bombardier have also rejected the U.S. claims. A U.S trade panel is due to rule in February on whether Boeing suffered any harm. The tariffs would kick in if harm is found.
Mr. Bastian’s comments came as Delta reported a better- than-expected quarterly profit and said the revenue environment was improving, even though recent hurricanes disrupted its network.
The airline opened the re- porting season for what is traditionally the industry’s busiest and most profitable quarter. However, airline stocks have slumped, as multiple weather disruptions and fare wars are expected to have depressed earnings.
Delta said its third-quarter profit fell to $1.18 billion from $1.26 billion a year earlier. Earnings per share slipped to $1.64 from $1.69, but the company’s $1.57 adjusted figure was ahead of the $1.54 consensus among analysts polled by Thomson Reuters.
Delta reported its passenger unit revenue—a key industry metric—climbed 1.9% compared with last year’s third quarter, a positive trajectory that it expects to continue. Unit revenue is forecast to rise by 2% to 4% in the fourth quarter, ahead of analysts’ current expectations.
American Airlines Inc. and United Continental Holdings Inc. this week raised their guidance for average passenger revenue for the third quarter, sparking a rally in airline stocks. U.S. airline shares fell sharply during the summer as efforts to boost fares and profits faltered because of intensifying competition on some of the busiest domestic routes from ultra low-cost carriers such as Spirit Airlines Inc.
|Delta's passenger unit revenue, change from a year earlier*|
BY DOUG CAMERON