Delta trims capacity
Delta warned of higher fuel costs and has trimmed capacity as part of its operational response, though the airline said it is keeping its June outlook intact. (el-balad.com)
Delta Air Lines said on April 8 that it is pulling back planned flight growth after a jump in jet fuel prices raised its cost outlook for the June quarter. (ir.delta.com) The airline said fuel costs are running more than $2 billion higher through June, and it now expects June-quarter fuel to average about $4.30 a gallon. Delta said it will cut capacity by about 3.5 percentage points from its original plan. (ir.delta.com) Delta kept its June-quarter guidance in place for operating margin of 11 percent to 14 percent and adjusted earnings of $1.70 to $2.30 a share, even as it warned that growth plans now carry a “downward bias” until fuel prices ease. Chief executive Ed Bastian said the company was not updating its full-year forecast because of uncertainty around how long the fuel spike will last. (ir.delta.com) (Reuters via MSN) Airlines sell seats months in advance, but fuel is one of their biggest variable costs and can move fast with oil markets. When fuel jumps, carriers can respond by cutting lower-margin flying, raising fees, or trying to charge more for tickets. (cnbc.com)) (U.S. News & World Report) Delta’s move comes after a strong March quarter on paper. The company said adjusted earnings rose more than 40 percent from a year earlier, even as it dealt with higher fuel bills and broader industry disruptions. (ir.delta.com) The airline is also leaning on its refinery business to soften the hit. Delta told investors its Monroe Energy refinery is expected to provide about a $300 million benefit in the June quarter. (cnbc.com)) (ir.delta.com) Other carriers are facing the same pressure. CNBC reported that Delta joined United Airlines and JetBlue this week in raising checked-bag fees as fuel costs climbed, while Reuters reported that airlines are trimming lower-margin routes rather than chasing growth at any price. (cnbc.com)) (Reuters via AOL) Bastian said the fuel shock could separate stronger airlines from weaker ones if high prices last. For now, Delta is still standing by its June targets while flying less than it once planned. (U.S. News & World Report) (ir.delta.com)
