Delta Leans Toward Cutting Capacity as United Weighs OptionMichael Sasso
Delta Air Lines Inc. and United Continental Holdings Inc. may offer fewer seats later this year amid concern that an oversupply now is leading to pressure on fares.
Delta was more definite about the possibility, saying at an investor conference Thursday that it is reviewing domestic seating capacity for after the summer season with a “bias” toward a reduction. Chicago-based United, speaking at the same event, said it was looking “very closely” at its available seats for the winter season.
Delta earlier this week forecast its passenger revenue from each seat flown a mile, an industry benchmark gauge, will drop in a range of 4 percent to 5 percent this quarter, more than previously anticipated. The announcement led analysts to speculate the airlines would trim capacity in the domestic market, which had been a bright spot for U.S. carriers as a strong dollar and economic weakness hurt international travel.
“The revenue picture on the domestic front looks a little sluggish,” Delta President Ed Bastian said at the Deutsche Bank investor conference Thursday. “I think we all wish the U.S. economy had a little strength to it.”
Delta, based in Atlanta, fell less than 1 percent to close at $42.92 in New York, while United declined 2.3 percent to $54.57. The Bloomberg U.S. Airlines Index dropped 1.4 percent.
Delta’s current forecast calls for a 4 percent increase in U.S. seating capacity in the third quarter from a year earlier, followed by a 2 percent gain in the fourth quarter.
If United decides to trim capacity, it may reduce the size of jets on some routes for the winter, Brian Znotins, the company’s vice president of network, said at the conference. The carrier said it was monitoring a slowing U.S. economy and growing competition in key markets such as Chicago, where American Airlines Group Inc. and Southwest Airlines Co. have cut fares.
Southwest earlier this week said it would cap growth in seating capacity at 7 percent this year, backing off a plan laid out in May to expand as much as 8 percent that helped send U.S. airline shares plunging.
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.
- Producer and DJ Known as Avicii Has Been Found Dead
- Deutsche Bank's Bad News Gets Worse With $35 Billion Flub
- Wells Fargo's $1 Billion Pact Gives U.S. Power to Fire Managers
- Oil Erases Losses as Impact of Trump Tweet on High Price Fizzles
- The U.K. Just Went 55 Hours Without Using Coal for the First Time in History