Per AJC DL Cutting Flights Back

Old Jul 12, 18, 9:16 am
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Per AJC DL Cutting Flights Back

https://www.ajc.com/business/delta-t...45OvVh9LKcOJI/

Apparently due to oil prices? Even though they have record profits....
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Old Jul 12, 18, 9:30 am
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Odd. The headline says it's trimming growth but the article says trimming period. What's the deal?

Also the photo caption is weird. That plane is not taking off!
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Old Jul 12, 18, 9:39 am
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“With strong revenue momentum, an improving cost trajectory, and a reduction of 50-100 bps of underperforming capacity from our fall schedule, we have positioned Delta to return to margin expansion by year end.”

So says the press release with the earnings statement.

https://s1.q4cdn.com/231238688/files...arter-2018.pdf

Fifty basis points = 0.50%

This is a reduction in growth not an absolute cut. YTD available seat miles were up 3.5%.
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Old Jul 12, 18, 12:11 pm
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Delta to Increase Fares, Trim Flights as Fuel Prices Rise

By
Alison Sider
Updated July 12, 2018 1:20 p.m. ET

Delta said it will boost fares and add fewer flights than planned as carriers contend with a surge in fuel prices amid a record stretch of profits.

Delta beat earnings forecasts on Thursday as record revenue helped offset a $578 million higher fuel bill than in the second quarter of last year.

But the No. 2 U.S. carrier by traffic said those rising fuel costs will weigh on profit for the rest of this year, leading it to lower its profit outlook. Delta said its fuel bill in 2018 would be $2 billion higher than last year.

“With higher fuel prices you’re going to expect to see ticket prices go up as well,” said Chief Executive Ed Bastian.
​​​​​​​https://www.wsj.com/articles/delta-h...sts-1531396327
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Old Jul 12, 18, 12:18 pm
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Sounds like a cut in flights to me: "Delta may be the only major carrier whose total departures will be lower this year than last, Bastian said."
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Old Jul 12, 18, 12:35 pm
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Originally Posted by AvalancheDog View Post
Sounds like a cut in flights to me: "Delta may be the only major carrier whose total departures will be lower this year than last, Bastian said."
Indeed. Well, I guess Ed's got to do something to keep his bonuses up.
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Old Jul 12, 18, 2:13 pm
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This is consistent with the long-term strategy DL adopted after the financial crisis. If costs increase or demand drops, DL will not simply chop prices to fill seats or not increase prices to maintain net revenue. Rather, it will cut capacity to meet profitability goals. That is what shareholders pay management to do.
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Old Jul 12, 18, 2:19 pm
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Total seats and seat miles will be up, flights will be down as MD-88s and MD-90s are replaced by 739s and A321s. But the 50 to 100 bps is a decline in planned seat-mile growth — not in the level of seat-miles or flights from last year.

(Relatedly, I imagine pulling down SEA-HKG made up a fairly large portion of this total.)
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Old Jul 12, 18, 9:34 pm
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Originally Posted by DiverDave View Post
Indeed. Well, I guess Ed's got to do something to keep his bonuses up.
They are a for profit company and stock bonuses are a very good way of fairly compensating executives.
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Old Jul 13, 18, 1:38 am
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Originally Posted by vincentharris View Post
https://www.ajc.com/business/delta-t...45OvVh9LKcOJI/

Apparently due to oil prices? Even though they have record profits....
Even with record profits, you can still have flights in the system which make very little profit, or operate at a loss. Moreover, no one can predict what oil prices will be in the future. So, if oil prices continue to rise, such routes will become even more unprofitable. I also wonder if this will make UA rethink their planned aggressive growth strategy for the next few years.
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Old Jul 13, 18, 9:07 am
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The Street wants capacity discipline and maintaining margins, so I think this was just them signaling this in advance of their earnings call.

Originally Posted by Fanjet View Post
Even with record profits, you can still have flights in the system which make very little profit, or operate at a loss. Moreover, no one can predict what oil prices will be in the future. So, if oil prices continue to rise, such routes will become even more unprofitable. I also wonder if this will make UA rethink their planned aggressive growth strategy for the next few years.
UA has a hedge against fuel prices with their Houston hub - when fuel prices are high, traffic at Houston generally needs to grow. And the opposite is true when prices are low. So as long as that is the basis of their plan it should be fine.
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Old Jul 13, 18, 9:34 am
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I wonder what Wall Street thinks of the SEA experiment. Some predicted Alaska would be driven out. And that has shown to be the furthest thing from the truth. Alaska has held their own very well at SEA.
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Old Jul 13, 18, 10:33 am
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Its normal media sensationalism... just like with government spending. They call it a 'cut' when it is just a reduction in growth.
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Old Jul 14, 18, 9:05 am
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Originally Posted by readywhenyouare View Post
I wonder what Wall Street thinks of the SEA experiment. Some predicted Alaska would be driven out. And that has shown to be the furthest thing from the truth. Alaska has held their own very well at SEA.
If you listened to their last investor call, they remarked that SEA's PRASM growth outflanked capacity (ASM) growth by quite a bit, and that SEA had the best improvement in profitability of any hub.
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Old Jul 14, 18, 4:09 pm
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Originally Posted by jamiestr View Post
If you listened to their last investor call, they remarked that SEA's PRASM growth outflanked capacity (ASM) growth by quite a bit, and that SEA had the best improvement in profitability of any hub.
it's very easy to improve profitability of a hub that makes no money.
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