Delta Airlines plans fare increases to offset rising fuel prices
In the face of rising aviation fuel prices, Delta Airlines considers raising fares as one of the options in dealing with the situation.
In its financial results for the June quarter 2011, Delta’s CEO, Richard Anderson was quoted as saying, “high fuel prices are putting significant pressure on the industry, but the benefits of Delta’s strategic actions and the dedication of Delta employees are evident in the solid profit we produced despite more than $1 billion in higher fuel expense.”
He added “Our revenue momentum, coupled with the capacity reductions we are making in September and actions to get our non-fuel costs to 2010 levels, will generate the margins we need to hit our return targets.”
The highlights of the result indicates that Delta’s net income for June 2011 was $366 million or $0.43 per diluted share, excluding special items.
According to the result, Delta’s net income was $198 million, or $0.23 per diluted share, for the June 2011 quarter and the company showed a strong top line revenue growth of 12% year over year which helped to offset more than $1 billion higher fuel expenses.
Delta generated $1 billion of operating cash flow and $700 million in free cash flow in the quarter. The company ended the June 2011 quarter with $5.6 billion in unrestricted liquidity, the result shows.
The other responses to meet higher fuel prices include among others, The company’s actions include; fuel surcharges and revenue initiatives to recover fuel cost increases through ticket prices; reducing its December quarter capacity by 4 – 5% year over year, an incremental 1 point reduction from previous guidance, focused in markets where revenues do not cover higher fuel costs.
Delta also plans to reduce domestic capacity from 1 – 3% and international capacity will be down 4 – 6%. In the transatlantic, Delta and its partners, Air France – KLM and Alitalia, established capacity levels as a single entity, leading to a combined reduction in transatlantic capacity of 7 – 9% for the December quarter, it says.
By Emmanuel K. Dogbevi
I dunno…I’ve read this article twice and it seems to me that Delta is doing pretty good despite the impact of higher fuel costs. Sounds like the management might be making the correct, if sometimes difficult, choices necessary to remain moderately profitable. What’s so wrong with that?