Delta sells more first class and other premium tickets, driving profits

Kelly Yamanouchi, The Atlanta Journal-Constitution on

Published in Business News

ATLANTA -- Delta Air Lines says more passengers buying first class and business class tickets, seats with extra legroom and premium economy tickets helped increase revenue in a quarter with record results.

Atlanta-based Delta saw a 10% increase in revenue from premium product tickets in the second quarter of this year.

The company reported a $1.4 billion profit for the quarter ended in June, up 39% from a year ago.

The profit came on a record 12.5 billion in revenue, up $761 million, or 6 percent.

In an interview with The Atlanta Journal-Constitution, Delta CEO Ed Bastian called it "the best June quarter in our history." On Thursday, while reporting its financial results, the company raised its profit forecast for the full year.

The airline has seen a small benefit from a reduction in flying by competitors due to the grounding of the Boeing 737 Max fleet. Delta did not have the 737 Max in its fleet, but some of its biggest rivals did.

"I think we've seen a benefit. I think it's been marginal," Bastian said.

He said overall flight capacity for the industry looks to be about 1 to 2% lower than expected before the 737 Max was grounded, "so it's a relatively marginal small amount of capacity." Bastian added that he doesn't think that's the main reason for Delta's results.

One major driver of profits -- corporate revenues -- was up 8% in the quarter for Delta. And the company also saw growth in revenue from its frequent flier program and American Express partnership, as well as from its contract aircraft maintenance business.


"We've got many increasingly diverse revenue streams," Bastian said.

But one area where Delta and other airlines have struggled this year is with cargo revenue. Delta's cargo revenue declined 17% in the quarter compared with the same quarter last year.

"There's no question that part of the slowdown in freight revenue is attributable to the tariff issues," Bastian said. He said a year ago, companies purchased extra inventory "in advance of the tariff dispute." They shipped the cargo either to or from the Pacific region, he said.

"And as a result of that, I think people are still carrying some pretty high inventory," Bastian said. Since air cargo is primarily used for just-in-time deliveries, excess inventory means less demand for air freight services.

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