DieselDragRacer
Well-known member
- Joined
- Apr 30, 2006
- Posts
- 11,056
NEW YORK (MarketWatch) — Delta Air Lines dialed back its growth plans for the year after a litany of unexpected events, from political unrest to natural disasters, slammed the industry.
But despite the difficult environment, the country’s No. 2 airline said it was able to grow first-quarter unit revenue, an industry metric that reflects ticket prices.
“We’ve seen an unprecedented level of price discipline in the industry,” said Delta President Ed Bastian, speaking during an analyst meeting in New York. “We’ve had eight fare increases since the beginning of the year and we added another one on Monday afternoon.”
Shares of Delta added about 1% in early trading Tuesday, but the stock is down about 17% in the last three months as investors have reacted to the higher fuel prices.
Fare hikes are helping to offset a recent spike in fuel prices, spurred on by the political turmoil in several oil-producing countries in North Africa and Middle East. Delta said its estimated fuel bill for 2011 is up by 35%, or $3 billion, from a year ago.
That’s cutting into earnings, Bastian said, reducing the company’s first-quarter profit as the carrier’s found itself saddled with about $600 million in higher expenses.
So to keep those ticket prices high and climbing, airlines have been reducing their growth plans to keep the available supply of passenger seats tight, even as an expanding global economy stimulates more demand.
For Delta, this means capacity would be reduced by 2% in the second half of the year, versus a prior plan to raise capacity by 2%, with a particular focus on routes where revenue growth hasn’t kept pace with rising fuel costs.
For the first quarter, unit revenue is expected to climb 7% to 8%, while unit costs, excluding fuel, should rise between 2% to 3%.
Unit costs with fuel included is expected to increase by 10% to 11%.
Delta raised its first-quarter capacity by an estimated 4% to 5%, driven by growth on its international routes. Domestic capacity is expected to come down 1% to 2% for the March period, in contrast to a 12% to 13% jump on the international side.
The U.S. airline industry was ravaged by winter storms in the first quarter, forcing thousands of cancellations and chipping away at industry profits. That was followed by the devastating March 11 earthquake and tsunami in Japan — a market where Delta has significant exposure.
Delta said it would reduce seat capacity to Japan by 15% to 20% through May to reflect an expected short-term decline in demand for travel to the country, and it’s already suspended service to Tokyo’s Haneda Airport.
Delta will also pull back capacity for Narita International Airport.
All told, the airline predicted the crisis in Japan would have a net impact of $250 million to $400 million on the company’s results.
But despite the difficult environment, the country’s No. 2 airline said it was able to grow first-quarter unit revenue, an industry metric that reflects ticket prices.
“We’ve seen an unprecedented level of price discipline in the industry,” said Delta President Ed Bastian, speaking during an analyst meeting in New York. “We’ve had eight fare increases since the beginning of the year and we added another one on Monday afternoon.”
Shares of Delta added about 1% in early trading Tuesday, but the stock is down about 17% in the last three months as investors have reacted to the higher fuel prices.
Fare hikes are helping to offset a recent spike in fuel prices, spurred on by the political turmoil in several oil-producing countries in North Africa and Middle East. Delta said its estimated fuel bill for 2011 is up by 35%, or $3 billion, from a year ago.
That’s cutting into earnings, Bastian said, reducing the company’s first-quarter profit as the carrier’s found itself saddled with about $600 million in higher expenses.
So to keep those ticket prices high and climbing, airlines have been reducing their growth plans to keep the available supply of passenger seats tight, even as an expanding global economy stimulates more demand.
For Delta, this means capacity would be reduced by 2% in the second half of the year, versus a prior plan to raise capacity by 2%, with a particular focus on routes where revenue growth hasn’t kept pace with rising fuel costs.
For the first quarter, unit revenue is expected to climb 7% to 8%, while unit costs, excluding fuel, should rise between 2% to 3%.
Unit costs with fuel included is expected to increase by 10% to 11%.
Delta raised its first-quarter capacity by an estimated 4% to 5%, driven by growth on its international routes. Domestic capacity is expected to come down 1% to 2% for the March period, in contrast to a 12% to 13% jump on the international side.
The U.S. airline industry was ravaged by winter storms in the first quarter, forcing thousands of cancellations and chipping away at industry profits. That was followed by the devastating March 11 earthquake and tsunami in Japan — a market where Delta has significant exposure.
Delta said it would reduce seat capacity to Japan by 15% to 20% through May to reflect an expected short-term decline in demand for travel to the country, and it’s already suspended service to Tokyo’s Haneda Airport.
Delta will also pull back capacity for Narita International Airport.
All told, the airline predicted the crisis in Japan would have a net impact of $250 million to $400 million on the company’s results.
