Delta, transatlantic JV partners, to cut transatlantic capacity 7%-9% this fall

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Published: May 20, 2011

Delta Air Lines 767-400. Photo: By Rob Finlayson.

SkyTeam members Delta Air Lines, Air France, KLM and Alitalia announced they will reduce transatlantic capacity between Europe and the US and Canada offered through their joint venture by 7%-9% this fall in response to significantly higher fuel prices “and fluctuating seasonal demand.” Separately, DL President Ed Bastian, speaking at the Bank of America Merrill Lynch Global Transportation Conference available via webcast said that DL will reduce its own transatlantic capacity by 10%-12% year-over-year via market cancellations and frequency reductions, which is an increase over the 8%-10% figure the carrier mentioned during its first-quarter conference call (ATW Daily News, April 27). Overall, DL will reduce post-Labor Day capacity by 4% compared to the year-ago period.

“Our focus is on post-Labor Day. Our spring and summer bookings look quite strong. The demand growth is there,” Bastian said. “We are seeing double-digit yield improvements across all sectors of the business.” April RASM rose 7%, with May RASM up 12% to date.

Delta will reduce post-Labor Day domestic capacity by 1%-3% compared to fall 2010 and is “focusing on continuing to right size a couple of our hubs as well as removing approximately 140 aircraft from our domestic system.” Pacific capacity will decline 1%-3%, he said, and Latin and Caribbean capacity will rise 2%-4%.

Bastian added that DL’s economy comfort premium coach seating product for international services “is already generating roughly $ 500,000 of new revenue streams a day.” On the cost side, “Our goal is to get our non-fuel unit cost flat [with 2010] by the end of this year despite the 4% capacity reduction.” DL is aware that its unit costs have “started to creep up” and “it has our attention,” he told analysts. The carrier is expanding a company-wide early retirement program with 55,000 employees eligible, that will “give us the opportunity to reduce the workforce, continue to freshen the workforce and drive lower costs as a result,” he said.

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