Delta Air Lines on Wednesday said it will halt flight growth for the remainder of the year despite surging demand to avoid mass cancellations that have plagued the carrier so far this summer.
Travelers have shaken off fears of COVID-19 and are taking to the skies at levels not seen since 2019, before the pandemic. But Delta now plans to hold its flight capacity at June levels for the rest of the year to improve its operational reliability as the airline has struggled to staff its full flight schedule.
"We had a pretty rough six weeks from mid-May through the end of June," said Delta CEO Ed Bastian. "It caused us to pull down the operations a bit."
Still, the combination of expensive air fares and tight capacity limits translated into profitability for the airline — in spite of high fuel costs and operational challenges. Domestic flight prices have increased 47% since January, according to an Adobe Analytics report in June.
Delta on Wednesday reported $735 million in net income for the second quarter, up from $652 million a year ago.
Delta's decision not to grow its flight schedule could mean fuller planes, higher fares and fewer flights despite robust demand.
The airline has managed to improve its on-time performance this month, he said.
"The reality is that we've adjusted our supply and our schedules to accommodate the staff we have," Bastian said. Later, "we'll make a decision whether to grow the schedule in the future."
"The demand is very strong," he said. "It's just our ability to make sure that we deliver a high-quality operation."
Bastian said Delta has also had to reduce some flights due to capacity limits at London Heathrow amid staffing shortages at the British hub.
With the recent wave of coronavirus infections from the omicron BA.5 subvariant, Delta has also had an increase in unscheduled absences.
"We've embedded those assumptions now in our staffing model, assuming it's going to continue for some period of time," Bastian said.
He said the increased flight cancellations, use of overtime and lower revenue reduced the company's operating margin by about 1-2 percentage points in the second quarter ended June 30.
The airline reported $13.82 billion in operating revenue, up from $7.13 billion in the second quarter of last year. But its operating expense also climbed significantly, to $12.31 billion in the quarter, up from $6.31 billion a year ago. That's in part from a hiring spree to staff more flights and from high costs such as fuel.
Bastian still expects Delta to have "meaningful full year profitability" this year.
The airline's domestic passenger revenue was 3% higher in the second quarter than 2019 levels, while international passenger revenue was 81% recovered. Business travel is also increasing, with domestic corporate sales about 80% recovered and international corporate sales 65% recovered.
Looking forward, Delta's flight capacity in the third quarter is expected to remain 15-17% lower than 2019 levels, but total revenue is expected to be 1-5% higher.
