Americans are travelling in record numbers this summer, but Delta has seen its profits drop 29 percent.
Bosses mostly blame the surprise fall on the discounting of economy fares across the industry – due to too many seats on offer.
That is bad news for Americans travelling later this year and next.
While they may have been able to snag cheaper fares so far this year, airlines are set to cut capacity which will push up prices.
‘We see the industry already taking pretty significant corrective action by pulling capacity down,’ Delta CEO Ed Bastian said.
Delta’s profits fell 29 per cent in the April to June quarter due to too many cheap economy seats
‘And we expect by the end of August, we’ll have that back in balance.’
After Covid, demand for travel soared as Americans who had been stuck at home made up for lost time and also spent money saved up during lockdowns.
To keep up, airlines bought more planes, hired staff and rolled out more flights. But after flooding the market with seats, the amount of available now exceeds demand.
That means carriers are needing to discount fares, Bastian said.
He said Delta will cut the seats on offer – and he expects others to do the same.
Bastian disputed any notion that middle-class travellers are pulling back on spending.
He said it is simply supply and demand – the airline industry, including low-fare carriers, is adding flights even faster than demand is growing, leading to lower fares.
‘The discounting is in the lower-fare bucket,’ he said.
In March, Delta became the latest airline to hike its baggage fees – the third major US carrier to do so in the last two weeks.
The fee for both a first and second checked bag increased by $5 for domestic and short-haul international routes – which is $10 more for a round-trip.
Airlines are enjoying a summer travel boom, with more than 3 million people passing through US airport security checkpoints in a single day on July 7.
The boom has failed to lift earnings at most of the US carriers as excess industry capacity has undermined pricing power.
Major airlines have scheduled about 6 percent more seats in the domestic market this month than a year earlier, data from consultancy Cirium shows.
Average round-trip ticket price for a US domestic flight was $543 in May, down 1 percent month-on-month and 3 percent lower from a year earlier, according to data from Airlines Reporting Corporation (ARC).
As well as profits for the April to June quarter falling, Delta is also predicting a lower profit than Wall Street expects for the third quarter.
Delta said Thursday it earned $1.31 billion from April through June, down from $1.83 billion dollars a year earlier.
The results come after the airline made an undisclosed number of non-union office staff redundant in the autumn of 2023
Revenue rose 7 percent to nearly $16.66 billion – a company record for the quarter.
‘Demand has been really strong,’ chief executive Ed Bastian said in an interview. ‘International, business (travel), our premium sector all outperformed.’
Delta’s results showed a continuing divide between passengers who sit in the front of the plane and those in economy class. Revenue from premium passengers jumped 10 percent – about $500 million – but sales in the main cabin were flat with a year earlier.
Delta plans to add flights at a slower rate for the rest of the year, and Mr Bastian said he believes other airlines will too, which could give the carriers more pricing power.
Delta doesn’t disclose average fares, but passengers paid 2% less per mile in the second quarter, and there were a couple more empty seats on the average flight, compared with a year earlier.