Delta will put off plans to expand capacity in the second quarter as soaring jet fuel prices continue to hammer the airline industry.
In a statement released as part of Delta’s Q1 earnings report, CEO Ed Bastian said the carrier will adjust capacity “with a downward bias until the fuel environment improves.”
A reduction in capacity growth could increase already-elevated ticket prices. It was not immediately clear which routes or markets would be affected by the pullback.
Jet fuel prices have nearly doubled since the start of the war in Iran in February, and many airlines are scrambling to lessen the financial blow by raising ticket prices and fees and reworking their schedules to improve efficiency. In Europe, some carriers are even looking at temporarily grounding aircraft to conserve fuel.
But Delta said this week that it is in a stronger position than most of its peers. Executives cited the company’s solid financial foundation, well-regarded brand, and ownership of its own oil refinery, which is expected to save around $300 million in the second quarter alone. Most of Delta’s oil is shipped from the coast of West Africa, keeping it clear of the conflict in the Middle East.
Delta managed to outrun fuel prices and TSA-related challenges at some airports to deliver non-GAAP operating revenue of $14.2 billion and pre-tax income of $532 million in the first quarter. Earnings were in line with the carrier’s guidance, and beat expectations from industry watchers.
In an interview with CNBC on Tuesday, Bastian said consumer demand remains strong despite the upward pressure on fares.
“Our consumers, which sit at the top end of the ‘K,’ are continuing to invest in travel,” he said, referencing the idea of a bifurcated “K-shaped” U.S. economy. “It’s their priority, and they continue to invest in that experience.”
Effective Wednesday, Delta raised its fees for checked bags, joining competitors United, JetBlue, and Southwest. The airline said the hike was needed to keep ahead of “evolving global conditions and industry dynamics.”
