In this file photo made June 7, 2010, a Delta Airlines Inc. plane sits on the tarmac at Seattle-Tacoma International Airport in Seattle.Ted S. Warren/The Associated Press
Delta Air Lines Inc. will trim planned growth for the second half of 2016 and delay delivery of four jets as the carrier attempts to reverse a revenue decline that has extended more than a year.
The second-largest U.S. airline will hold expansion to less than 2 per cent as it pares domestic-capacity increases to 2.5 per cent in the fourth quarter from at least 4 per cent during the first nine months of the year. International capacity will be unchanged to down, Delta said in a U.S. regulatory filing Monday, citing rising fuel prices and weak foreign economies.
Delta and other U.S. airlines have been hurt by the weak euro, which has fallen 17 per cent against the U.S. dollar in the past two years, while a surge in seating capacity between the United States and Europe kept fare increases in check. Revenue from transatlantic flights accounts for as much as 20 per cent of Delta's total revenue, company president Glen Hauenstein said in an April call with analysts.
"Broad commercial initiatives should result in Delta being the first network carrier to return to positive unit revenue growth later this year," the airline said in the filing, which was prepared for a presentation to investors.
Delta is trying to reverse five straight quarters in which passenger revenue for each seat flown a mile, a critical yardstick for airlines also known as unit revenue, declined from a year earlier. The cuts will remove about one percentage point of planned capacity expansion in the fourth quarter.
The moves show that Delta is growing responsibly and not simply adding seats when costs are relatively low, said Paul Lambert, an analyst at Tocqueville Asset Management in New York.
"For an established airline like them, they should not be growing capacity faster than world GDP," he said, pointing to weak global economic growth. "I would expect other airlines to do the same."
The Atlanta-based carrier also said it would boost its annual divided by 50 per cent to 81 cents (U.S.) a share and committed to returning at least 70 per cent of free cash flow to shareholders, up from 50 per cent previously.
The airline will delay delivery of Airbus Group SE A350 wide-body aircraft to 2019 and '20 that originally were to arrive in 2018. The postponement will better match the delivery schedule to the rate of expected improvements in international markets, Delta said.
While still historically inexpensive, the price of jet fuel has increased 67 per cent from a 12-year low on Jan. 20, according to data compiled by Bloomberg. Delta has said it expects to pay $1.48 to $1.53 a gallon in the current quarter, up from the $1.33 in the first.
---------------------
Delta deal gives Bombardier breathing room on aid, Leitao says
Bombardier Inc. has turned a corner and its deal with Delta Air Lines Inc. makes federal aid for the Canadian plane maker less urgent, Quebec's Finance Minister said.
Delta's $5.6-billion (U.S.) agreement to purchase at least 75 C Series jets will help Montreal-based Bombardier promote the plane and win more orders, Carlos Leitao said on Friday in an interview in New York. The deal comes as negotiations between the federal government and the company over a $3-billion financing plan are said to be at an impasse.
"There is less urgency, but it's still important, especially from the point of view of the signal that it would send to the market," Mr. Leitao said, referring to a federal investment.
Prime Minister Justin Trudeau's proposal to Bombardier would see his government and the province of Quebec each invest $1-billion directly in the company, along with a share sale that would raise another $1-billion to bolster the firm's balance sheet, people familiar with the negotiations said last week.
Frederic Tomesco, Josh Wingrove and Scott Deveau