The US-China trade spat crimps Delta’s 3Q Pacific corporate revenues

Throughout the prolonged trade spat between the United States of America (USA) and China that has dragged on for nearly a year and a half, Delta Air Lines has never cited any weakness in corporate demand driven by the skirmish. But during 3Q2019 the tariffs did create a drag on its performance in the trans-Pacific.

Delta’s topline Pacific revenue fell -4.6% year-on-year in 3Q2019 and unit revenues in that entity tumbled -7.6%. One percentage point of the fall in unit revenue was attributed to currency headwinds, and many other challenges contributed to the rest of the decline. Delta president Glen Hauenstein explained that trans-Pacific corporate travel fell due to “tariffs in the automotive and manufacturing sectors, and lower leisure demand to and from China”.

In late Aug-2019, CNBC reported that China aims to impose a +25% tariff on US cars and +5% on auto parts and components beginning in mid-Dec-2019. The publication stated that China had paused those tariffs in Apr-2019. One of the major US auto industry meccas, Detroit, is Delta’s second largest hub measured by system seat deployment.

Despite some of the headwinds Delta faces in the trans-Pacific the airline posted.a +5% improvement in corporate revenue growth year-on-year in 3Q2019. The airline’s +8% growth in domestic corporate revenue growth offset “a modest decline in international corporate revenue,” said Mr Hauenstein.

Delta is maintaining an overall solid view of corporate demand for the foreseeable future. “In our most recent Corporate Travel Survey, 86% of travel managers expect to maintain or increase their travel spend in 2020,” Mr Hauenstein stated.