Delta cuts international flights despite bringing in a $1.2 billion profit for this year’s first quarter. The airline announced Wednesday that it intends to scale back on international flights by three percent during October, November, and December of 2015. It’s targeting nations impacted most by “volatility” in the currency and commodity markets this year, CNN Money reports.
Which continent and countries will Delta reduce their flights to? There will be a 15 to 20 percent decrease in flights to Japan, 15 percent decrease with service to Brazil, 15 to 20 percent decrease to Africa, India, and the Middle East. Flights to Moscow will be completely suspended.
Delta cuts international flights to these destinations because this is where “markets that have been most affected by the strong dollar and markets where demand has been negatively impacted by the decline in oil prices.”
The lower fuel prices help to offset impact of strong dollar on international revenues, Wall Street Journal explains.
As WSJ writes, Delta “said those moves, which will result in flat capacity overall in the fourth quarter, should help return its unit-revenue performance to growth after several quarters of declines.”
A report by ABC News puts it another way. The news source sums it up by saying analysts are “worried that falling oil prices have tempted airlines to add too many new flights, which tends to depress fares. They feared that airlines would abandon their recent strategy of no or slow growth in capacity, which has helped boost fares and produce record profits.”
Jim Corridore is an analyst with S&P Capital IQ. He hopes other airlines will follow Delta’s example.
“It’s a great sign that the company is going to be disciplined whenever there is any sign of demand weakness anywhere in the world. We hope the rest of the industry follows Delta’s lead.”
CEO Richard Anderson said this was the best first quarter in the company’s history from a financial perspective. He adds that domestic flight travel “is performing very well and demand is solid.”
Delta Airlines reported $746 million in net income for the first quarter, with a record pre-tax March quarter profit. The profit has more than tripled from the $213 million on its books a year ago. The first quarter of 2015 is the best in its history.
With Delta cutting international travel to certain countries during the last three months of the year, their profit margin will probably rise even higher this same time next year.
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