Delta Air Lines said Friday that air fares aren’t coming down, even though the cost of jet fuel has fallen sharply. In its second-quarter earnings report, the airline said its various measures of fares are up 11%-12% due to strong demand for travel, and that it sees “sustainability” in those fares.
Strong Demand for Travel
Delta CEO Ed Bastian said the strong demand for travel will keep fares high. “Airfares are a function of supply and demand,” Bastian told CNBC in an interview Friday. “The demand set is really strong.” Fuel prices paid by Delta increased 75% compared to a year ago throughout the quarter as the U.S.-Israeli war with Iran led to a spike in oil prices.
Delta is projecting fuel costs in the current quarter will be down 20% from the adjusted fuel price it paid in the second quarter, as oil prices have retreated to near the levels they were before the war. Jet fuel spot prices are down 36% from their peak. Bastian said that fares across the industry are still lower than they were pre-pandemic, when adjusted for inflation.
One thing lifting fares is demand for travel from more affluent passengers. Delta’s premium passenger revenue was up 17% in the quarter, while main cabin revenue was up only 8%. “Our consumer is financially very healthy, (with a) tremendous amount of wealth accumulation,” he said of Delta’s core passenger base. Travel is a top priority for those consumers, according to Delta’s surveys.
Original reporting: 40/29 / KHBS (NW Arkansas) — read the source article.
