Sat | Jun 25, 2022

Delta hikes revenue outlook on sharply higher airfares

Published:Thursday | June 2, 2022 | 12:07 AM
A Delta Air Lines plane leaves the gate on July 12, 2021, at Logan International Airport in Boston.
A Delta Air Lines plane leaves the gate on July 12, 2021, at Logan International Airport in Boston.

To hear it from Delta Air Lines, happy days are here again, with travellers gladly paying sharply higher fares just to get on an airplane and go somewhere this summer.

Delta said on Wednesday that it expects second-quarter adjusted revenue will be back to pre-pandemic 2019 levels, and revenue per seat should be up to eight percentage points better than it originally expected.

Travellers are paying more for any type of seat, from basic to premium, CEO Ed Bastian said during an investor conference.

“We expect pricing this summer to be up, probably somewhere between 25 per cent and 30 per cent on average,” Bastian said. “We’ve never seen anything of that scale.”

However, the Atlanta-based airline is facing surging prices for jet fuel. Other expenses – primarily labour – are spiking, too. Delta expects non-fuel costs to soar up to 22 per cent above 2019 levels on a per-seat basis, more severe than a mid-April forecast of 17 per cent.

With the mixed outlook, Delta shares fell five per cent in morning trading, and other airlines stocks were also lower.

The surprisingly strong rebound in air travel this year has allowed airlines to push fares higher, but also left them struggling to handle the crowds with fewer workers than they had before the pandemic. Staffing issues contributed to widespread cancellations and delays over the Memorial Day holiday period.

Delta scuffled more than any other big US airline, with more than 800 cancelled flights during a five-day span. The union representing Delta’s pilots blamed understaffing.

Bastian said Delta’s corps of 12,000 pilots is big enough, but it will take eight to 12 months to train new hires and current ones who will replace the 2,000 senior pilots who retired or quit during the pandemic.

The CEO said the airline – which last week trimmed its planned summer schedule by up to three per cent – is building more time between flights and tweaking its schedule at the Atlanta airport to run a smoother operation.

AP