Delta Air Lines later this year will trim international
capacity 3 percent in response to the strengthening U.S. dollar and decreased
demand in certain markets that owes to lower oil prices, executives said
Wednesday during a first-quarter earnings call.
Delta’s biggest capacity cuts, set to begin in the fourth
quarter, will include a 15 percent to 20 percent decrease in service to Japan,
Africa, India and the Middle East and a 15 percent decrease in service to
Brazil. Delta in the winter also will suspend service to Moscow.
“Like all U.S. global companies, we’re working with volatile
currencies around the world,” Delta CEO Richard Anderson said. “Unlike other
U.S. global companies, our margins and profitability will expand in 2015.”
Delta president Ed Bastian, who earlier this week noted
that currency volatility is contributing to a billion-dollar revenue shortfall
this year, said service cuts should continue through the winter into the spring
of 2016, at which point Delta would be in a better position to assess fuel
prices and currencies. “We’re keeping all options open,” he said.
Even with international service challenges, the past three
months were the best first quarter “both operationally and financially in
Delta’s history,” Anderson said. Its domestic business is “performing very
well, and demand is solid,” he added. Corporate revenue was up 3 percent,
boosted by increased business from the financial services sector and through
Delta’s joint venture with Virgin Atlantic, according to Delta executives.
Delta’s net income for the quarter was $746 million,
compared with $213 million in the first quarter of 2014.
Consolidated passenger revenue per available seat mile
declined 2 percent year over year during the quarter, and cost per available
seat mile declined 8 percent. The average fuel price per gallon declined 3
percent, and Delta should see a “significant tailwind from fuel prices”
beginning in July, Anderson said.
Consolidated capacity increased 5 percent year
over year during the quarter, and traffic increased 4 percent. As a result,
passenger load factor declined a percentage point to 81.7 percent. Delta’s
yield for the quarter was flat year over year.