The head of Delta Air Lines has said that higher ticket prices await flyers as a result of the rising cost of oil, in another sign of inflationary pressures seeping into the economy.
Ed Bastian, Delta chief executive, said in an interview that the third-largest US carrier would add a fuel surcharge to international flights “as the market conditions permit”. Higher fuel costs “will no question” raise ticket prices, both domestically and internationally, he said.
His comments come after jet fuel prices rose sharply after Russia invaded Ukraine last month. While it has partially receded, jet fuel remains about two-thirds higher than a year ago.
Glen Hauenstein, Delta president, said at an industry conference earlier on Tuesday that the airline needs “to recapture somewhere between $15 and $20 each way on an average ticket value of about $200”, and that the company is confident passengers will be willing to pay it.
Bastian told the Financial Times that customers continued to book flights despite uncertainty over fuel costs and the war in Ukraine. While Delta’s bookings for transatlantic flights fell between 5 and 10 per cent in the week following the invasion, Delta had its biggest ever day of sales last week.
The positive outlook was shared by Shai Weiss, chief executive of Delta’s joint-venture partner Virgin Atlantic, who said that sales have snapped back after taking a hit at the start of the war.
Bastian saw no signs US consumers have been put off travelling. “As the conflict continues, there could be an element of caution. But we’re not seeing any significant impact,” he said.
Delta said that in the first quarter it had 83 per cent of seat capacity compared to 2019, before the pandemic. The Atlanta-based airline forecast a pre-tax quarterly loss but a profit for the month of March.
“It’s a little early to tell what’s going to happen to oil prices and consumer demand over the summer. You’d never want to be in a position of cutting capacity when you’re having such robust demand,” Bastian said.
He said that business travel has returned to 60 per cent of normal levels and “is continuing to push upwards” from the depths of the pandemic. Delta is prepared for a fifth of its large corporate business to disappear entirely, but expects premium leisure travellers to replace it.
United Airlines said on Tuesday that it would cut its planned 2022 seat capacity, partly due to rising fuel prices. American Airlines on Tuesday reduced its first-quarter capacity forecast, but said that revenue has improved because of stronger travel demand.
Source: Economy - ft.com
