Delta Air Lines today announced plans to reduce the transatlantic capacity by 15% during winter. Delta’s President Edward H. Bastian made this announcement during the presentation in Bank of America Merrill Lynch Investor Conference. This is in contrast to the original plans to increase the capacity. Delta itself will reduce the transatlantic capacity by 10–12 % (against the original plan to increase the capacity by 3–4 %). The JV partners will reduce the capacity by 7–9 % (against the original plan to increase it by 7–8 %).
Transatlantic business has been the weakest link during the March quarter and almost entirely contributed to the year-over-year profit decline. Delta is planning to align its revenue, capacity and structure to build a sustainable business model at $3+ per gallon jet fuel. Delta anticipates the jet fuel price to be $3.20 for the June quarter and $3.10 for the September quarter. Because of the additional expenses due to fuel, Delta plans to keep other costs flat by reducing capacity, retiring more aircraft.
Memphis hub reduced: Delta already indicated that it would reduce the departures from Memphis by 25%. Even though Delta claims that the reduction in departures will not significantly reduce the ASM, I do not believe it. Would Memphis be next Cincinnati? Would it cut the daily Memphis – Amsterdam service? It is possible.
New York and Atlanta will have minimal impacts: New York JFK and Atlanta would retain most of its routes as JFK has the best O&D traffic and ATL is the world’s largest connecting airport. But expect frequencies to be trimmed on many sectors, especially from ATL.
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