Delta Air Lines is throttling back its expansion plans for the second half of this year to stave off any impact that rising fuel prices and a weak European economy might have on its revenue, the company said Monday.
The Atlanta-based carrier also said it will delay taking delivery of four new widebody aircraft by a year or two in order to better match its "expected pace of international market improvement," in a filing presentation prepared for investors.
The move is on par with Delta's reputation as being conservative and calculated with growth.
Delta still plans to increase its capacity, but about one point less than previously expected. Domestic growth will slow from about 4 percent in the first three quarters to about 2.5 percent in the fourth quarter while international capacity will remain relatively flat.
The airline did not specify which of its "underperforming" domestic markets would experience reduced growth in the fourth quarter. Delta executive Glen Hauenstein said in April that "all of our domestic hubs improved margins in the quarter with the best performances in Salt Lake City, Atlanta and Minneapolis."
Internationally, a weak euro and strong U.S. dollar, uncertainty with fuel prices and geopolitical strife — like the March 22 terrorist attack in Brussels — are all factors that "we continue to address with capacity actions," Hauenstein said in April. Hauenstein ascended from executive vice president of commercial to president earlier this month.
Airlines often experiment with new routes when fuel prices are low. This increase in competition then applies downward pressure on airfares, which is good for consumers but challenging for the airlines. Even if new transatlantic routes, like Turkish Airlines' Atlanta-to-Istanbul or Qatar's Atlanta-to-Doha, don't succeed, they are putting pressure on Delta's revenue in the short term.
"The transatlantic, which accounts for 15 percent to 20 percent of our revenue, is where we have the greatest challenge. Yields remain under pressure as industry capacity growth continues to outstrip demand," Hauenstein said on the April earnings call.
