Delta expects to increase fares this year amid growing
corporate demand and controlled capacity, executives said during the carrier's
fourth-quarter earnings call.
In Delta's most recent survey of corporate customers, 85
percent planned to maintain or increase travel spend during the first quarter,
Delta president Glen Hauenstein said. After the U.S. presidential election in
November, the carrier saw business demand improve and yields begin to firm up. While
yield for the fourth quarter declined 2.7 percent year over year, December was
the first month in two years in which yield increased year over year.
"If the economy holds out, which we're forecasting it
will, and business continues to travel, which we forecast it will, the
opportunity to raise fares" is significant considering the industry is
offering less capacity, Hauenstein said. The opportunity to increase them on a
year-over-year basis will get "better as we move throughout the year because
the fares got to be so low for business travel by mid-year last year."
Fares on major business routes are down 30 to 40 percent
from historical levels, so increases will be a "journey, not a race,"
he added.
Delta also plans to continue expansion of its no-frills Basic
Economy fare this year. Today, it covers about 40 percent of Delta's
domestic network, and the carrier plans to offer it across the entire domestic
network by the end of this year and expand to international routes next year.
During the fourth quarter, Delta increased capacity 0.9
percent as traffic increased 0.8 percent. Load factor declined 0.1 percentage
points to 85.1 percent. Delta plans to "remain conservative and keep our
capacity growth in check" this year to reverse two years of unit revenue
decline, Hauenstein said.
Delta's
net income in the fourth quarter declined 37 percent year over year to $622
million. On Dec. 1, the airline and its pilots ratified an agreement that was
retroactive to the beginning of the year, and the $475 million expense hit the
books during the fourth quarter. For the full year, Delta reported a net income
of $4.4 billion, down 3 percent year over year.