Driven by strength in the
banking and financial services sector, Delta Air Lines executives on Wednesday
disclosed yet another quarter of solid year-over-year corporate revenue growth.
The trend has accelerated in recent weeks, according to the carrier's executives,
who expect such strength will continue through the year—the result of corporate
share gains and growth in overall spending among current clients.
While US Airways, which also
released second-quarter earnings on Wednesday, shared fewer metrics with regard
to the corporate revenue environment, executives pointed to "improved
business demand" as the quarter wore on.
Delta's year-to-date corporate
revenue grew 4 percent from the same period last year, but "are up 8
percent in the last four weeks, driven by strength in the domestic
market," president Ed Bastian told analysts and media Wednesday during a
quarterly earnings call.
"The improving momentum
we've seen throughout the quarter continues into our summer bookings," he said.
The strong corporate revenue
mostly is the product of "organic growth" among established clients, Bastian
said, though Delta executives made several references to winning additional
Bastian said the banking and
financial services sector "led all sectors in growth, posting double-digit
year-over-year increases, proof that our efforts, especially in New York, are
Indeed, Delta's average fare
per mile on New York routes outpaced the systemwide average, according to
executives, suggesting strength in pricing there during a quarter in which
overall yields largely were flat year over year.
Meanwhile, Bastian pointed to
"solid corporate share gains" on the Atlantic, where he said fares continued
to grow year over year. The carrier expects that trend to accelerate once the
carrier on Jan. 1, 2014, launches its proposed joint venture with Virgin
Atlantic, pending an ongoing regulatory review.
While the "overwhelming
lion's share of the improvements is coming from the financial services and the
banking sector," Bastian noted that the technology sector also has posted
"double-digit" revenue gains.
Corporate revenue from Delta's
manufacturing base also "has picked up," growing year over year by
high single-digit percentages, though revenue from the defense and
transportation sectors declined, Bastian said.
It's still "early"
and the visibility is "preliminary," but the carrier's read on the
post-Labor Day shoulder season is "encouraging," said Bastian.
Looking even further ahead, Bastian
cited a recent survey of the carrier's corporate clients in which "80
percent indicated their second half of the year spend on Delta will either be
maintained at the same pace or increase on a year-over-year basis."
Meanwhile, recalling the demand
shocks that stemmed from the U.S. federal government spending cutbacks,
known as the sequester, that began in the first quarter, US Airways president
Scott Kirby during the carrier's earnings call Wednesday said "demand did
improve throughout the second quarter," noting that especially in June
"booking volumes for business demand got stronger."
He noted such strength
contributed to a June unit revenue increase of 1 percent year over year,
"compared with our initial guidance of flat to down 2 percent."
"What happened in the
March-April timeframe, though, was all the noise about sequester, and problems
in Washington caused other business demand to decline," Kirby said.
Those declines have reversed,
according to Kirby, and "business demand strength in particular is
continuing into the third quarter."
The same cannot be said for
the government travel sector. US Airways' government revenue during the quarter
declined 37 percent from the same period last year, "about the same as
what it was in March," Kirby said.
Kirby also said transatlantic
premium demand has been strong, with "demand from corporate
customers" for its lie-flat product "up 16 percent in the second
quarter. As we continue to improve our penetration of corporate accounts on the
continent, that has helped our European performance significantly."