Delta sees strong yields continuing amid disciplined capacity growth
Published: February 25, 2011
Delta Air Lines is confident that the strong yield environment it enjoyed during 2010 will be sustained this year, as it is taking a disciplined approach to capacity growth amid continued healthy passenger demand.
Speaking in London ahead of this year’s launch of two new transatlantic services to Heathrow, Perry Cantarutti, Delta’s senior vice-president Europe, Middle East and Africa, said that the airline will grow capacity by no more than 1% this year, which is lower than it had forecast in its original 2011 guidance.
“We’re very focused on judicious capacity management and ensuring that our capacity is right-sized for the economic environment,” he says. “Our early guidance for 2011 projected system-wide capacity being up several percentage points, but that has been revised to being flat to up one point.”
Cantarutti says that the reduction in the capacity growth plan results from “not flying the airline as hard” as previously envisaged. He points out that Delta’s capacity increase in 2011 will be slower than GDP growth around the world, except to restricted markets like Heathrow where access is limited to due to slot availability.
This relatively flat capacity growth results from aircraft retirements outstripping the airline’s “modest” fleet replacement plans, says Cantarutti.
Flightglobal’s ACAS database shows Delta currently has just 25 aircraft on firm order, but shows no new deliveries due in 2011. The airline is however adding Boeing MD-90s acquired secondhand.
Cantarutti is hopeful that rivals will take a similarly disciplined approach to capacity: “We’re all looking at the same set of facts in terms of market dynamics, and we think that there’s reason for our competitors to be similarly judicious.”
The SkyTeam alliance carrier enjoyed a “really great year” in 2010 with its profit rising $ 2.5 billion to $ 1.4 billion, and this was driven by strong passenger demand yields, says Cantarutti. “We continue to see that in evidence. Based on what we see in terms of forward bookings and the fare environment, we’re feeling good about demand.”
Atlanta-based Delta merged with Northwest in 2008 and Cantarutti says that by early 2010 most of the key integration pieces were completed a year before. “The merger has already generated $ 1.5 billion of synergies and that will ramp up to $ 2 billion as the integration matures,” he says.
ACAS shows the airline with an active fleet of over 720 aircraft. The remainder of the McDonnell Douglas DC-9s acquired through the Northwest merger will be retired over the next 18 months, says Cantarutti, as well as some regional types operated by feeder arms: “Up to 24 Saab 340 turboprops and 60 of the least fuel efficient regional jets.”
Three years on since the merger, the combined entity is enjoying far superior “revenue production per aircraft”, he adds. “We’re able to better allocate our fleet to route type and what we find is that with several hundred fewer aircraft we’re generating revenues that are back to 2008 levels thanks to better utilisation and productivity.”
Delta launches twice daily services between Heathrow to Boston and daily flights between Heathrow and Miami in March. This takes its Heathrow transatlantic destinations to six.
Meanwhile Cantarutti says the airline aims to reinstate transatlantic flights to Cairo – suspended due to the civil unrest – in May. In the meantime it continues to serve the Egyptian capital through connections with its European partners Air France-KLM.
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