Ed Bastian, Delta Air Lines chief executive, says the airline expects to recoup $2bn in higher fuel costs this year partly by increasing ticket prices, thanks to continuing passenger demand despite the US-China trade war and concerns about a slowdown in the US economy.
“Demand is strong and when demand is strong it gives you a good opportunity to price and recover,” he told the Financial Times in an interview. “We’re expecting fuel costs up $2bn year on year for us in ’18, but we’re also anticipating our overall profits to be about flat” at around $5bn. “On that simple premise we recovered almost all the fuel increase within the year which, on that size of the increase, hasn’t been done before,” he said, adding “we’re managing the other costs of our business well. In the third quarter, our non-fuel costs were flat”.
His comments come at the end of a US third-quarter earnings season during which several US carriers reported stronger than expected profits despite fuel prices up nearly a third from a year ago. “We are seeing revenue accelerate at a fairly robust clip, with management teams stating this is the best revenue environment in recent memory,” Helane Becker, airline analyst at Cowen, wrote in a recap of third-quarter earnings.