Delta says raising tariffs will help it make a profit as fuel costs rise

The company adjusted a net loss of $ 784 million in the first quarter, which was $ 50 million less than Wall Street analysts expected. Its revenue was $ 400 million more than the $ 9.3 billion estimate. The company reported a profit in March.

The demand for travel is so strong right now, CEO Ed Bastian told CNBC that March is the best month for Delta bookings – for flights and upcoming trips.

“The demand is unique,” he told CNBC. “It continues in April. Consumers are ready to go.”

“As consumer spending shifts from goods to services and experiences, as travel restrictions and business travelers continue to skyrocket, there are clear signs that demand for travel and experiences is declining,” he told investors in a conference call on Wednesday morning. .

Bastian said demand for travel at the beginning of the quarter was negatively affected by the rise of Govt cases of the Omigron variant, but that demand quickly recovered as the upsurge began to subside in mid-February. He added that there were no signs that the Russian invasion of Ukraine would have a negative impact on the trip.

That strong demand translates into full flights and higher fares. Delta expects unit revenue to increase by 10% in the second quarter, compared to the same period in 2019. Its unit revenue in March was higher than in March 2019, and the airline has made a positive comparison in the first month since the outbreak.

“We are successfully recovering a significant portion of the fuel run-up,” Bastian told investors.

The first quarter will generally be the slowest in profit and revenue for American airlines. But spring travel should be strong in the second quarter, which includes the season and the start of summer travel.

The number of workers returning to the office after two years of distance work is increasing and business trips are expected to increase. The same is true of international travel. Those passengers typically pay higher fares than domestic passengers on domestic flights.

Domestic business travel in the first quarter was only 50% of pre-epidemic levels, but by March it had risen to 70%. Delta chairman Glenn Hoinstein said 90% of corporate customers surveyed said travel would increase in the second quarter.

Delta expects sales to fall 3% to 7% in the second quarter compared to the same period in 2019, before the epidemic severely disrupted air travel. Yet Delta then flew only 84% of its flying capacity. Continuous restrictions on international travel are one reason – but even domestic capacity is only 90% where it was before the epidemic.

Bastian said Delta is doing its best to increase capacity and need to recoup more aircraft on its schedule, including hiring more staff. But the company’s 15,000 new employees hired since the beginning of 2021 were not enough to cover staff losses during epidemics, with Delta offering early retirement and purchase packages to reduce the number of employees.

“Maybe by the end of the year, if we really push it, we can get 100% back [of pre-pandemic capacity]”He told CNBC. But that’s not the management’s current choice.

“Of course, now, for the need we have, we are sitting in a good place [on capacity],” he said.

Heinstein added that the airline did not see any reduction in demand due to higher fares. “We do not see much resistance to the price points we have in the market,” he said.

But, as a higher percentage of seats are already booked in the summer travel season than they were three years ago, price-sensitive customers need to book in advance and be flexible with their travel dates.

Bastian said Delta believes Govt is transitioning from an epidemic to a manageable seasonal virus, which helps meet the need for travel. He said it was time for the end of the federal mask order on the trip. CEOs of most American airlines have also insisted that the order be allowed to expire.
CNN has learned that disease control centers plan to extend the mask order, which was due to end on Monday, by another 15 days.
Bastian revealed that from this month Delta will drop the $ 200 monthly surcharge it pays on health insurance if its employees are not vaccinated. Unlike some other airlines like United, Delta does not have to vaccinate its employees.

“We believe the epidemic has moved to the seasonal virus,” he said of the reason for dropping the extra charge.

There is no clear scientific consensus yet on the climate of Kovit-19.

But while the number of people admitted to the hospital for covid disease is declining, those who have not been vaccinated are still more likely. At the time Delta announced additional payments for its unvaccinated workers, Bastian said it would cost the company an average of $ 50,000 for staff hospitalized with the disease.

However, Delta and other aviation sectors are facing fuel prices.

Delta said it expects to pay an average of $ 3.20 to $ 3.35 for jet fuel in the second quarter, $ 2.79 a gallon in the first quarter and only $ 2.06 in the first quarter of 2019.

But the company has one major advantage over most of its competitors: it owns its own oil refinery. The refueling refinery generated $ 1.2 billion in revenue for the quarter, up sharply from $ 48 million in the first quarter of 2019.

Shares Delta (From) Lunch traded up 4% on news and guidance.

Leave a Comment