It was a bittersweet moment for Delta Air
Lines CEO Ed Bastian.
Second quarter earnings for Delta were up,
but did not exceed analyst expectations, causing Bastian to voice
some concerns about the industry.
Delta still had a record quarter, but its
growth of four percent fell short of analyst predictions of nearly six percent.
Bastian said on an earnings
call, "What you see happening is the impact in the domestic marketplace to
the lower fare discounting that's been going on this quarter."
Analysts at TD Cowen sent a note
that said Delta's numbers would "likely raise concerns about industry
health and lead to more pressure on low-cost carriers and ultra-low-cost
carriers to cut capacity."
Low-cost carriers have been
cutting capacity in the hopes that their respective bottom lines would balance
out. It has led to some trepidation by Bastian and others about the health of
the industry overall. His words echoed with investors last week as Delta stock
was down almost five percent even though he said the company was “fairly well
insulated.”
He can afford to say that,
pardon the pun, since Delta is the financially strongest airline in the
country. But other carriers are not on equal footing. Even mighty American
Airlines said it would have to cut capacity.
Bastian is concerned from an
industry standpoint because low-cost airlines have little wiggle room to operate
since they don’t – or can’t – offer higher seating fares to make up the
difference in any loss of revenue. But
even though he said he expects travel demand to decrease in the fall, he is
optimistic.
"We are encouraged by
actions the industry is taking," he said. "Seat growth is
decelerating, and there appears to be increased focus on improving financial
performance."
Delta, in fact, recently expanded
its service to the Cayman Islands.
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