The US carrier expects gains to hold if fuel prices finally recede, citing gains in premium revenue.
Delta Air Lines is confident in its ability to continue selling tickets – especially in premium cabins – despite surging fares.
Executives say airfares have risen by less than inflation in the wider economy, helping carriers pass on higher fuel costs customers.
“But as we see the customer response, candidly, the limited amount of resistance that we see and the fact that our product continues to be seen in a consumer basket as reasonably affordable, even at a 20% price increase”, says chief executive Ed Bastian, “I think that’s a very good sign for the future.”
Delta on 9 October reported 16% revenue growth for the quarter ended 30 September, helping offset persistently high fuel costs that took a significant bite out of overall profit.
The carrier – the first to report its financial performance for the third quarter – lowered its profit outlook for the year, now expecting earnings per share between $5.10 and $5.60 (from above $6.50).
“I think where we’re at is very sustainable,” says Bastian on an earnings call.
Demand for air travel in North America saw a 2.1% decrease in August year on year, even as capacity rose 2.8%, according to figures from IATA.
Delta plans 3% capacity growth through the end of the year as the industry tightly watches load factors and yields to maximise profits in such a high-cost environment.
Premium cabin revenue continues to be a main contributor of growth on all levels at Delta, aided by similar increases in loyalty, corporate sales, and maintenance services. Front-of-plane products generated $6.82 billion in revenue in the quarter, up 18% year on year and just ahead of main cabin’s $6.80 billion, which rose 12%.
“The corporate demand has been very resilient”, says chief commercial officer Joe Esposito, “and it’s great to see that there’s no cracks in it as we go into the future, and the economy is very strong.”
More than 60% of tickets are booked for the fourth quarter, says Esposito, and forward cash sales grew nearly 20% in the third quarter.
If fuel prices finally recede, says Bastian, “the test for us at Delta, and I think for the industry, is to ensure that we sustain the revenue that we have created”.
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