Atlanta: Delta Air Lines Inc. said it plans to cut seating capacity later this year on international routes as the strong dollar and declining oil prices damps overseas travel demand.
The pullback includes fourth-quarter reductions of as much as 20 per cent to Japan, Africa, India and the Middle East, 15 per cent to Brazil and a halt in Moscow flights, Delta said Wednesday.
The third-biggest US carrier gets about 30 per cent of its revenue from international sales, and the strength of the US currency, which almost reached a 12-year high against the euro earlier this week, is hurting demand from some foreign countries and contributing to lower revenue from each seat flown a mile.
Delta also gave its first forecast for second-quarter operating profit margin, at 16 per cent to 18 per cent. That was in line with some analysts’ estimates.
“The substantial benefit from lower fuel prices will again more than offset the unit revenue decline of 2 to 4 per cent for the June quarter to produce operating margins north of 20 per cent at market fuel prices,” said Delta President Ed Bastian in the statement.
First-quarter profit excluding one-time items rose to $372 million, or 45 cents a share, the company said. That’s a record for the first quarter since its 2008 merger with Northwest Airlines and beat the average analyst estimate of 44 cents.
US airlines, among the best stock performers last year, were off to their worst start in the first quarter since 2011. Earlier this month Deutsche Bank analyst Michael Linenberg downgraded Delta, United Continental Holdings Inc. and American Airlines Group Inc., saying the strong dollar, an increase in available seats by foreign carriers and slowing global economic growth will weigh on results.
Still, analysts are projecting a record $2.9 billion in first-quarter adjusted profit for the six biggest US airlines, according to data compiled by Bloomberg, buoyed by low jet kerosene prices.
