Delta Air Lines Projects Stable Airfares and Solid Revenue Amid Fuel Cost Normalization
Chief executive Ed Bastian does not expect airfares to fall anytime soon. Delta Air Lines views the revenue momentum it saw in the second quarter as “sustainable,” the Atlanta-based carrier’s chief executive, Ed Bastian, said during its quarterly earnings call on 10 July. Adjusted total unit revenues (TRASM) increased 12.4% during the period compared to last year. Higher airfares, coupled with continued strong demand and the collapse of Spirit Airlines in May, are driving Delta’s confidence. The airline has reinstated its outlook for the full year at the same levels as previously forecast, after suspending the guidance following the start of hostilities between the USA, Israel and Iran in February. Delta reported an adjusted operating profit of $1.6 billion in the second quarter on a 19% year-over-year increase in revenue to $19.8 billion. Costs, led by fuel and refinery expenses, increased 23% to $17.9 billion. Its adjusted operating margin was 9.4%. The airline’s performance sets the tone for the rest of the US airline sector. After an uncertain start to the June quarter, owing to the Iran war, fuel prices have moderated despite the on-again, off-again nature of the conflict, and travellers have proven undeterred by higher airfares. American Airlines, Southwest Airlines, United Airlines and the rest of the sector are set to report their own quarterly performance in the coming weeks. With the uncertainty seemingly behind it, Delta is focused on its numerous revenue initiatives. Segmentation of the business-class cabin rolled out earlier in July in its latest effort to further boost premium revenues. Joe Esposito, the airline’s commercial chief, says business class segmentation is in the “early stages” with further differentiation planned where, in the future, top spenders will receive a different onboard experience from those who buy the cheapest business fares. Delta will resume growth as well with the improved outlook. The airline plans to increase capacity, measured in available seat miles (ASMs), by roughly 1% in the third quarter and 2-3% in the fourth quarter, says Esposito. International growth, including the recent launch of Los Angeles-Hong Kong flights, will drive capacity growth. Capacity at Delta increased just 1% in the second quarter. In 2027, Delta plans to resume its long-standing fleet upgauging programme with the arrival of new Boeing 737 MAX 10s, which will replace ageing Boeing 717s and 757s, Bastian says.