Delta CEO Predicts Stabilized Airfare Pricing
Joe Cortez October 13, 2016
Oil price increases could lead to better pricing across airlines.
Delta chief executive officer Ed Bastian offered good news to flyers with the release of their quarterly earnings statement: Better-priced and more stable airfare prices could be coming soon. In an interview with CNBC, Bastian said that Delta has been looking towards bottomed-out airfare prices “for quite some time.”
Bastian noted that when oil prices went down, there was additional capacity that was not being utilized aboard aircraft. If crude oil prices rise to around $50 per barrel, the new leader at Delta says the industry will be primed for healthier pricing for both the airline and the consumer.
“At a $50 price point, [that] will allow us to price our product, as an industry, in a more healthy way,” Bastian told CNBC.
The comments were made as Delta experienced a decline in revenue of around six cents per available revenue mile as compared to the same time frame in 2015. Overall, Delta earned $1.9 billion during the third quarter, a decline of over $250 million from the year before.
To further exacerbate these problems, the airline announced in their quarterly profit statement that the August computer outage cost the airline over $150 million. The equipment failure caused thousands of delays and cancellations for the Atlanta-based carrier, while stranding passengers in transit.
“Delta’s resiliency stood out this quarter as we worked through the outage, continued revenue headwinds, and volatile fuel prices,” Bastian said in a statement. “To produce the industry’s best operational reliability and service for our customers.”
Looking forward to the last quarter of the year, the airline predicted a 1.5 percent increase in capacity across the network. Despite the increase, the total profit margin could be lowered by revenue management issues and potential union deal with their pilots, which was not budgeted into the final quarter projections.
[Photo: Delta]
To clarify, he means stable and extraordinarily high prices, right? The only health he is concerned about his the health of Delta's bottom line. I love when these CEO speech writers word articles in such away that make it appear that they are a consumers best friend. The USA airlines essentially have an oligarchy which is why the CEOs of these airlines scream like cranky babies when an international airline tries to come into the US market.
Bastian noted that when oil prices went down, there was additional capacity that was not being utilized aboard aircraft. If crude oil prices rise to around $50 per barrel, the new leader at Delta says the industry will be primed for healthier pricing for both the airline and the consumer. “At a $50 price point, [that] will allow us to price our product, as an industry, in a more healthy way,” Bastian told CNBC. --------------------------------------------------------------------------------------------------------------------------- His logic makes no sense whatsoever. Fuel costs the airline more than any other category of expense (including labor), normally in the range of say 27% - 40% of the total (depending on fuel prices). So, he's glad that oil has risen from $30 a barrel to $50 a barrel, effectively raising his airline's fuel costs by 67%? What is this guy smoking?
“At a $50 price point, [that] will allow us to price our product, as an industry, in a more healthy way,” Bastian told CNBC. So....that means, making less profit is "more healthy"??? Sounds like he just wants an excuse to raise prices.