Delta
Air Lines, which holds the largest market share of U.S. carriers to Paris
and has a partnership with Air France, anticipates a $100 million loss this
summer as travelers avoid the City of Light during the upcoming Olympic
Games.
According to NBC News, Delta is
reporting that travel to European destinations is booming this summer with the conspicuous
exception of the French capital. Unfortunately, forecasters had anticipated it
would be a popular destination as people clamored to serve as spectators to the
prestigious international event.
Instead, Delta’s third-quarter
profit and revenue projections aren’t shaping up the way Wall Street
forecasters had expected after airlines added extra Paris flights in the lead-up
to the Olympics. Despite this, Delta has reaffirmed its full-year outlook.
"Unless
you’re going to the Olympics, people aren’t going to Paris... very few
are," said Delta CEO Ed Bastian in an interview with CNBC. “Business
travel, you know, other type [sic] of tourism is potentially going elsewhere.”
Together with its
partner, Air France, Delta holds about 70 percent of the market in terms of nonstop
service between the U.S. and France. It therefore stands to lose the most due
to travelers’ aversions to visiting the Olympic host city.
But, the impact of
the Games on travel to Paris is not limited to Delta. Air France’s parent
company, Air France-KLM, also anticipates a significant drop in revenue due to
the Olympics. The company is predicting a loss of up to 180 million euros
($195.5 million) from June through August.
“International
markets show a significant avoidance of Paris,” the company explained. “Travel
between the city and other destinations is also below the usual June-August
average as residents in France seem to be postponing their holidays until after
the Olympic Games or considering alternative travel plans.”
However, both
Delta and Air France-KLM expect a rebound in Paris demand following the
Olympics, which run from July 26 to August 11. "During the period itself
there’s a little bit of a hesitation," Bastian said.
One of the main obstacles
in traveling to Paris amid the Games is the massive spike in hotel room prices.
Hotel data firm STR has forecasted that Paris’ upscale hotels will see a 45-percent
increase in revenue per available room (RevPAR) during July and August versus
last year. By way of comparison, STR expects a three- to five-percent increase
in London and a two- to four-percent increase in Rome for the same period.
During an earnings
call on Thursday, Delta’s president, Glen Hauenstein, noted that many travelers
are rearranging their European vacations to occur outside of the traditional
summer season. This shift provides airlines with an opportunity to generate
more revenue outside of peak travel months.
“We see the season
extending as a whole group of people, whether or not it’s retirees, whether or
not it’s people with double incomes and without children, who don’t have the
school concerns,” he said. “It’s actually a better time to go to Europe in September
and October than it is potentially in July and August when the weather is so
hot and everything is so packed.”
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