Earlier this week, Delta Airlines (NYSE:DAL) said that a key metric for measuring passenger revenue fell significantly—at a rate of nearly 10 percent—in August. They blamed, at least in part, their computer issues during the month that resulted in the cancellation of 2,300 flights over a three day period to slash approximately $100 million in revenue.
That’s about 2 percentage points in decline in passenger-unit revenue.
Unit revenue, of course, is that “key metric” monitored in airline performance as it represents the amount of money received by a domestic air carrier per seat flown per mile.
Not, shrinking unit revenues is nothing new; alas, that has been a constant among US airlines for at least the last year. The price war in the industry—and the rise of discount airlines, for example, that can better meet consumer demand for rock bottom prices—is making it much harder for some of the major airlines to compete.
Of course, many airlines were able to take advantage of the oil glut, which dropped oil—and, therefore, fuel—prices that allowed airlines to add more flights and more available seats. Unfortunately, the industry as a whole got a little too ambitious about consumer demand and overestimated it, which resulted in the fare war US airlines currently find themselves within.
But the fare war was already afoot when Delta encountered its computer glitch last month. Altogether, then, overall traffic in the eighth month of the year fell about 2.8 percent while capacity increased only 0.5 percent. Load factor—the percentage of seats filled—fell from 87.3 percent to 84.4 percent year-over-year.
Delta (NYSE:DAL) goes on to report that the technical problem plaguing the company in August was caused by a malfunction within the electrical system that powers on the computers at Delta’s Atlanta headquarters. Officials at the company said that this failure is a singular event, but the outage imposed new concerns of the present state of the company’s information technology.
Concerns like this, of course, are really the last thing Delta needs. Already trying to deal with increased pressure from weakness in domestic yield and the consistent imbalance in the supply-demand chain, the company would prefer to focus on restoring revenue than on fixing computer glitches. Obviously, the two go hand in hand in some ways.