Delta Seat Cut May Go Beyond 4% Plan as Airlines’ Gains Slow

Delta Air Lines Inc. (DAL) may reduce seating capacity after the peak summer travel season beyond a planned 4 percent as carriers including larger rival United Continental Holdings Inc. (UAL) report slowing revenue growth.

“You continue to look and tweak it and make changes,” Chief Executive Officer Richard Anderson said in an interview today after the airline’s annual meeting in New York. Delta will “continue to match capacity to the demand curve,” he said.

Delta reiterated its 4 percent seat-cut plan target in a regulatory filing this week, saying most of the pullback would be through a 10 percent to 12 percent reduction on trans- Atlantic routes. That would reverse previous growth in the region for the Atlanta-based airline.

A second-quarter gain of 10 percent in Delta’s unit revenue was “slightly softer” than the unpublished estimate of Hunter Keay, a Wolfe Trahan & Co. analyst in New York, according to a note to clients. United said last week that its revenue for each seat flown a mile rose no more than 4 percent in June, trailing the 15 percent gain in May.

AMR Corp. (AMR)’s American Airlines said unit revenue rose about 5 percent in the quarter, lagging behind Keay’s estimate of 7.6 percent.

New-Jet Decision

Anderson reiterated plans to make a decision on a narrow- body jet order before the end of this year, probably sometime between the Labor Day and Thanksgiving U.S. holidays.

Delta has said it plans to order 100 to 200 planes, plus options for 200 more, with deliveries starting in 2013. The company’s fleet had been mostly Boeing Co. (BA) airplanes until the 2008 purchase of Northwest Airlines added Airbus SAS jets.

Delta fell 3 cents to $9.17 at 4:03 p.m. in New York Stock Exchange composite trading. The shares have dropped 22 percent in the past year.

Anderson said travel demand in the U.S., Latin America and China is “strong” and sales in Japan are recovering after the earthquake and tsunami earlier this year.

“The weakness tends to be in Europe,” he said.

Yields, or the average fare for each mile flown, are rising by at least 10 percent, Anderson said. Corporate bookings also are up more than 10 percent from a year earlier, even as broader economic indicators such as gross domestic product forecasts “aren’t what you’d like them to be.”

Delta, the world’s second-largest airline after Chicago- based United, plans to trim jobs as it lowers capacity, and has offered buyouts and early retirement to 55,000 employees in the U.S. Anderson said he expects to get “a sizable number” of takers, without providing a specific figure.

Previous voluntary retirement and buyout offers have been successful at Delta. In June 2008, the company cut 4,000 jobs through similar methods, double the number it initially targeted, and more than 2,000 workers accepted buyouts in 2009.

To contact the reporter on this story: Mary Jane Credeur in New York at mcredeur@bloomberg.net.

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net.

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