Growth in 3Q14 operating expense
Delta’s operating expenses increased by 16%, on 7% higher revenue, to $10,343 million. Higher costs had a negative impact on Delta’s operating profits. It resulted in a 47% reduction in operating income to $835 million in 3Q14—compared to 3Q13.
All of the expenses increased during the quarter—except for aircraft repair and maintenance and regional carrier expense. Maintenance savings came from the retirement of the 50-seater aircraft. The parts from these retired fleets were recycled. They were used in other aircraft.
Profit sharing expense had the highest growth cost. It increased 54% to $384 million. The year-to-date (or YTD) profit sharing expense was $823 million. Delta expects that this expense will be $1,000 million for 2014. According to the company, this is the highest profit sharing expense in its history. It represents 15% of the pay.
Other than profit sharing expenses, Delta’s unit cost growth was also a result of higher special charges. We’ll discuss this more in the next part of this series.
Cost growth compared to its peers
Delta managed to keep the growth in unit cost—excluding fuel, profit sharing, and special items—below 2% for the fifth consecutive quarter. However its total cost per available seat mile (or CASM) increased by 12% during the quarter. It increased to $0.1569—compared to $0.1397 in 3Q13.
In 3Q14, Delta’s (DAL) unit cost was the highest among its peers—including United’s (UAL) $0.1434 cents, American’s (AAL) $0.1429 cents, Southwest’s $0.1239 cents, Alaska’s (or ALK) $0.1226 cents, and JetBlue’s (or JBLU) $0.1161.
Among these airlines, the unit cost increased for three carriers:
However, Delta’s year-over-year (or YoY) unit cost growth, at 12% during the quarter, was greater than AAL’s 1.7% and JBLU’s 1.2%. United improved its cost efficiency significantly compared to other airlines. It had a 4% reduction in unit cost.
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