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SKY-HIGH DEMAND

Delta expects to turn a profit because customers are willing to pay higher fares

A Delta airlines plan flies over a blue sky.
Reuters/Mike Blake/File Photo
Back in business.
By Courtney Vinopal
Published Last updated

Since the war in Ukraine began seven weeks ago the price of jet fuel has risen to its highest level since 2014, and commercial flying has gotten more expensive.

But Delta Air Lines says this hasn’t slowed down demand—in fact, the company booked more flights in March than any other month in its 90-plus year history, CEO Ed Bastian said today (April 13). Though the airline reported a net loss of $940 million in the quarter ending March 31, it expects to turn a profit in the coming months thanks to this sustained demand.

Delta’s stock rose on the news, as did shares of its competitors American and United, which report earnings next week.

Demand remains strong despite higher fares

The cost of jet fuel has risen by 40% since the start of the year, as sanctions on Russian energy have caused oil prices to spike. Delta’s fuel bill totaled $2.09 billion last quarter, a 6% increase from the same period in 2019, even though its seat capacity was down by 17%.

Rising fuel prices mean that air fares are up across the board—the average cost of a US domestic round-trip flight is currently $330, up 40% from the beginning of the year, according to travel analytics company Hopper. Bastian said on March 18 he expected higher fuel prices to lead to a 10% increase in air fares. But despite the fact that record inflation is hitting customers’ pocketbooks, the Delta CEO said today he expects them to prioritize travel in their budgets.

“People have been cooped up for the last two years,” he told CNBC. “They’re done investing in their homes and their garden and want to go see someone else’s garden for a change.”

The next challenge for Delta may be to staff up sufficiently to meet improving travel demand. Bastian said the airline has hired nearly 15,000 employees since the start of 2021, and is “well-staffed” for the summer.

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