Delta Air Lines cites strong corporate demand through 3Q2018 as it reveals non-hub long haul European flights are doing “quite well”

Despite continuing uncertainty triggered by geopolitics and trade tiffs, US carrier Delta Air Lines is maintaining a positive view of its corporate revenue prospects for 3Q2018. The major has also revealed that the several long haul flights it has debuted from non-hub US airports to facilitate connections from the hubs of its European partners are proving popular with passengers.


Summary:

  • Delta Air Lines is maintaining a positive view of its corporate revenue prospects for 3Q2018 driven by a 10% increase year-on-year during 2Q2018;
  • Airline executives confirm 84% of corporate travel managers expected to maintain or increase their travel spend during 3Q2018 in recent survey;
  • Across the Americas, Delta says weak demand to Mexican beach markets and currency devaluations are being offset by strength in Central America and the Caribbean;
  • Delta says strategy to fly long haul from non-hub US airports to facilitate connections from the hubs of its European partners is bearing fruit.

The airline’s optimism is driven by a 10% increase year-on-year in the airline’s corporate revenues during 2Q2018. Delta’s first class and Comfort plus revenues grew nearly 20% on an 8% increase in its available premium seats.

Delta executives stated in its most recent survey, 84% of corporate travel managers expected to maintain or increase their travel spend during 3Q2018. During its 2Q2018 earnings call discussion, the airline’s management expressed no concerns about tensions created by a shift in US trade policy that entails levying tariffs on imports from several countries.

Additionally, Delta is not seeing any traffic declines as clouds of uncertainty continue to hang over the fate of Brexit. “We hear a lot about Brexit and we see all the rhetoric about Brexit, but business traffic to and from the UK on Delta and our partners is at record levels,” said company CEO Ed Bastian. “Similarly in Continental Europe, we are seeing record revenues in terms of yields and in terms of traffic into Continental Europe.

Delta has a joint ventures with SkyTeam partners Air France-KLM and Alitalia and Virgin Atlantic. According to CAPA and OAG, the combined seat share of Delta and Virgin Atlantic from the US to the UK is roughly 24% as of mid-Jul-2018.

As Delta retains a bullish view about its corporate prospects for 3Q2018, company executives stated weak demand to Mexican beach markets and currency devaluations were offset by strength in Central America and the Caribbean. As a result, the airline is reducing capacity to match demand levels in those affected markets.

Although the recent presidential election in Mexico is driving some concern over how the new administration will approach aviation policy. But Delta is concluding that Mexican business markets are showing improvements in 2H2018 now that the election is over and MXP is beginning to stabilise.

“Our JV partnership with Aeromexico, which just celebrated a one-year anniversary, gives us a great platform for providing the best product for business and leisure travellers to and from Mexico,” Mr Bastian concluded.

Over the last couple of years, Delta Air Lines has added several long-haul flights from non-hub US airports to facilitate connections from the hubs of its European partners, and the airline believes that strategy is bearing fruit.

The airline recently upgauged its long-running Pittsburgh-Paris service, and has recently launched service from Indianapolis and Los Angeles to Paris and Orlando and Los Angeles to Amsterdam.

According to the Indianapolis Business Journal, Delta could receive USD3.5 million in 2018 and USD2 million in 2019 from the Indiana Economic Development Corporation based on the number of passengers its flight from Indianapolis to Paris attracts. The airline launched Indianapolis’ only flight to Europe in May-2018.

Delta executives recently stated the flight is “doing quite well”, and stated the airline was not simply flying to Paris, but offering connections to Asia and Africa through Paris.

“We would never contemplate flying from Indianapolis to Paris if it were two endpoints in our network,” said Delta president Glen Hauenstein.  “But really given the strength of the frequent flyer base and the loyalty we have in Indianapolis, and the amount of traffic that’s continuing on to those destinations beyond Paris, that’s where we have really added over the past year using our partner hubs.” Data from CAPA and OAG show that Delta is the second largest airline at Indianapolis International airport measured by seat deployment, with a nearly 23% share.

Mr Hauenstein said Delta’s route from Orlando International airport to Amsterdam that debuted in Mar-2018 was also doing well. He also noted that prior to the launch of flights from Los Angeles to Paris and Amsterdam, Delta was the only US major global network airline “that did not have nonstop European service on our own metal”.