Delta Air Lines says wider fare variety will boost revenues

[CHICAGO] US carrier Delta Air Lines Inc said a wider variety of seating options and fares from basic economy to flat bed seats in first class will help revenues grow 4 to 6 per cent in 2019, while fuel prices should drop by US$300 million next year.

Speaking at the airline's investor day, Chief Executive Officer Ed Bastian said 30 per cent of Delta's revenue stream now comes from higher-paying premium products, double the amount six years ago.

Less than half of revenues come from No 2 US airline Delta's main cabin.

"Those rates of improvement bring better margins," Mr Bastian said.

US airlines have been segmenting their cabins with an increased focus on more lucrative business travel. Delta said it will start offering five different cabins on four of its aircraft next week, with a view to equipping all of its widebodies with the five cabins by 2021.

Atlanta-based Delta sees 2019 profit between US$6 and US$7 per share, boosted by robust air travel demand. At the high end of that range, it would be a 25 per cent increase over what analysts expect for 2018, according to IBES data by Refinitiv.

Shares in Delta opened 0.4 per cent lower.

The carrier also forecast a US$300 million drop in fuel expenses for 2019. US airlines raised ticket prices and hiked baggage fees this year as oil prices lingered near multi-year highs for most of the year.

Oil prices have now fallen about 30 per cent since hitting a four-year high in October, giving some respite to Delta and its peers such as American Airlines Group Inc and Southwest Airlines Co.

Delta expects US$3 to US$4 billion in free cash flow, and about US$4.5 billion in capital expenditures for 2019.

REUTERS