A Healthy Delta

Issue Overview

The airline world was ready for the start of fourth-quarter earnings season. Instead, it became preoccupied by a frightening mid-air event aboard an Alaska Airlines flight. Boeing and its Max jets are once again under scrutiny as investigators investigate. By Friday, however, at least some of the attention turned back to earnings as Delta reported its results. As usual, they were strong, this time thanks to demand that has yet to show signs of softening. Cheaper fuel helped too, negating some of the pressure from higher labor costs.

JetBlue won’t report for another few weeks. But it delivered some big news anyway: Joanna Geraghty will replace Robin Hayes as the company’s chief executive. Hayes mentioned health issues as a reason for his departure. The leadership transition comes at an awkward time, as JetBlue awaits a court ruling on whether it can proceed with a takeover of Spirit Airlines. Hayes made the merger a centerpiece of his plan to address his airline’s chronic margin underperformance. It was a risky move, and one that’s lost some luster as Spirit’s financial performance has entered a tailspin. On the other hand, U.S. airline mergers have a near-perfect record of success since the America West-US Airways deal of 2005. They’ve eased competitive pressures, fostered lucrative loyalty programs, amplified purchasing power, and created corporate entities almost too big to fail. Will JetBlue — now piloted by Geraghty — get its chance to harvest similar benefits?

JetBlue by the way, also gave an update on its business, noting better than anticipated demand and operational reliability last quarter. Still, it will post a fourth quarter loss, likely caused in part by something Delta highlighted: Caribbean beach markets are oversaturated with capacity.

In the meantime, Hawaiian’s shareholders are preparing to vote on Alaska’s takeover deal. AirAsia and AirAsia X are combining. Norwegian closed its deal to buy Wideroe. Finnair and Jetstar Asia joined JetBlue in announcing new CEOs. And Eva Air joined Delta in ordering A350-1000s. Airbus and Boeing alike sold lots of new airplanes in the past year. Now, can they build them on time and without defect?