uploads///Chart  Capacity

DAL Adds More Capacity to Its Most Profitable Transatlantic Route

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Jan. 4 2019, Updated 1:15 p.m. ET

Capacity additions

Since 2018, Delta Air Lines (DAL) has been focusing on route alignment and capacity additions. In December, the company increased its capacity by 5.4% YoY (year-over-year).

In 2018, Delta Air Lines’ capacity increased 3.6% YoY. In the year, its capacity growth was significantly higher than its 2017 capacity growth of 1%.

Delta has been aggressively adding capacity in the domestic market. In December, the US market’s capacity increased 6.7% YoY, while its growth rate was 5.2% in the year. Delta’s international capacity rose 3.1% in December. Its capacity increased 3.4% in Latin America, 3.7% in the Atlantic region, and 1.7% in the Pacific region.

However, Delta’s international capacity increased a mere 0.9% YoY in 2018. By region, it increased its capacity by 2.7% in the Atlantic. However, in the Latin American and Pacific regions, Delta reduced its capacities by 0.5% and 1.5%, respectively.

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Focusing on the transatlantic route

For the last few quarters, Delta Air Lines has been strategically reducing its capacity in the Latin American and Pacific regions to better invest in the profitable transatlantic market, which mainly connects flights between the United States and Europe. This realignment of routes has helped Delta improve its TRASM (total revenue per available seat mile).

In the third quarter of 2018, Delta’s TRASM increased 4.3% YoY to 16.25 cents from 15.58 cents a year earlier. This growth rate was significantly higher than those of its rivals American Airlines (AAL) and Southwest Airlines (LUV), which provided TRASM growth rates of 1.8% and 1.2%, respectively. United Continental’s (UAL) TRASM grew 6.1% YoY, the highest in the US airline industry (IYT), in the third quarter.

Outlook

Delta Air Lines has been adding capacity to capitalize on the growing opportunities in the global economy, mainly in the United States and Europe. US GDP showed remarkable growth in the first three quarters of 2018. A healthy job market and a steady rise in wages increased consumers’ discretionary incomes. A rise in disposable income provided consumers with the freedom to spend more on traveling, driving demand for airline companies’ services.

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