Delta boosts second-quarter revenue outlook with significantly higher airfares
To hear it from Delta Air Lines, the happy days are back, with travelers willingly paying significantly higher fares just to get on a plane and go somewhere this summer.
Delta said Wednesday it expects second-quarter revenue to return to pre-pandemic 2019 levels, even with fewer flights. The airline said revenue per seat is expected to be up to 8 percentage points higher than it had originally forecast.
However, the Atlanta-based airline is facing soaring jet fuel prices. Other expenses – mainly labor – are also increasing. Delta expects non-fuel costs to climb up to 22% above 2019 levels per seat, which is more severe than a 17% forecast in mid-April.
With a mixed outlook, shares of Delta closed down 5% and shares of other airlines also fell more than the broader market.
As summer approaches, travelers are paying more for any type of seat, from basic to premium, Delta CEO Ed Bastian told an investor conference. “We expect prices this summer to increase probably between 25% and 30% on average,” he said. “We have never seen anything of this magnitude.”
It’s not hard to find people on social media complaining about high fares, but airline executives scoff at the idea that current prices might scare off customers.
Speaking later at the same investor event, United Airlines CEO Scott Kirby said fares only returned to 2014 levels, after adjusting for inflation. Also, he said, travel demand has proven to be insensitive to price.
“If you’re worried about prices destroying demand, you’re betting against history,” he said.
The surprisingly strong rebound in air travel this year has allowed airlines to raise fares, but has also left carriers struggling to manage crowds with fewer workers than before the pandemic. Staffing issues have contributed to widespread cancellations and delays over the Memorial Day holiday period.
Delta has struggled more than any other major US airline, canceling more than 800 flights in five days. The union representing Delta pilots blamed the understaffing.
Bastian said Delta’s corps of 12,000 pilots is large enough, but it will take eight to 12 months to train new and current employees who will replace the 2,000 senior pilots who retired or resigned during the pandemic. .
The CEO said the airline – which last week slashed its planned summer schedule by up to 3% – is piling up more time between flights and changing its schedule at Hartsfield-Jackson Atlanta International Airport to ensure smoother operation.