High fuel costs are translating into higher air fares for Delta Air Lines and other U.S. carriers.
Atlanta-based Delta announced Thursday it will trim its flight schedule for this fall as it grapples with the rising price of oil. The airline plans to focus on under-performing routes when making its cuts.
That means some flights booked for fall travel could be canceled or shifted to smaller planes.
Higher fares are also likely.
“With higher fuel prices, you’re going to expect to see ticket prices go up as well,” said Delta CEO Ed Bastian. He said ticket prices are up 4 percent year-over-year.
Delta’s competitors also are face rising fuel costs that could affect their flight plans.
Oil prices have been increasing since early 2017, and the price of jet fuel is about 55 percent higher than it was a year ago, according to the International Air Transport Association, a global airline group.
Delta said it now expects its fuel bill to be $2 billion higher this year compared with last year, and slashed its forecast for the year for earnings per share. For the full year, Bastian said he expects the company to generate pre-tax earnings of about $5 billion, in line with last year.
The company reported a $1 billion profit for the second quarter of the year, a 14 percent decline from its nearly $1.2 billion quarterly profit a year earlier.
To combat higher fuel costs, “most airlines will either raise their base prices or sell fewer cheap tickets,” meaning more expensive vacations for passengers who haven’t yet booked their flights, according to a release from AirHelp, an air passenger rights and flight compensation company.
Bastian said the company has had early success in covering higher fuel costs, offsetting two-thirds of the impact of the fuel cost increase in the June quarter.
Delta executives said demand for international flights is strong.
“We’re not seeing any signs that the rumored escalating trade wars are impacting business travel or travel in general,” Bastian said. Delta president Glen Hauenstein said business traffic to and from the U.K. on Delta and its partners “is at record levels.”
But Delta wants to bring in more revenue per passenger. Airlines are facing increased competition from ultra low-cost carriers like Norwegian and WOW Air on international routes.
That makes it harder to increase fares in the economy cabin, according to the International Air Transport Association.
A key part of the airline’s strategy is to up-sell passengers to more expensive seats with extra amenities. Delta plans to add premium economy seats to more of its international fleet.
Delta also announced the appointment of a chief strategy officer, Gary Chase, who was previously the company’s senior vice president of financial planning and analysis, investor relations and corporate planning. He was an analyst for Lehman Brothers and Barclays Capital before joining Delta.
Delta by the numbers:
Fuel bill for 2018: $2 billion higher than last year
Average fuel price per gallon April-June 2017: $1.60
Average fuel price per gallon April-June 2018: $2.21
Ticket prices: Up 4 percent year-over-year
Source: Delta Air LInes
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