Everyone's flying but there's still too many planes
Delta was overly optimistic about how many seats it could fill at profitable prices.
Airline stocks hit turbulence Thursday, after Delta’s Q2 results just missed expectations and the company’s forecast for the coming quarter was well below expectations.
Sales at America’s second-largest airline were still strong, rising 7% to $16.6 billion, suggesting that travel demand remains robust. But rising costs, including increases for fuel and labor, rose an even faster 10%.
Also, the airline’s “load factor,” the percentage of seats filled, slipped a percentage point to 87%, suggesting the company — or, as Delta executives put it, the industry — had been a bit optimistic about the number of planes it could fill at profitable prices.
Delta executives suggested that the industry as a whole was already adjusting to cut capacity and bring it into line with demand, potentially firming ticket prices.
“This is an industry that’s always challenging itself for how much capacity can be in the marketplace,” Delta President Glen Hauenstein told analysts on a post-earnings conference call, adding “we’ve really only been in an oversupply situation for a couple of months here, and the industry has already reacted.”
The market seemed to take some solace from such comments, after falling as much as 9% in premarket trading, Delta Air Lines cut those losses a bit during the trading session. United Airlines and American Airlines Group were also down.
