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Delta’s January Traffic Growth Matches Its Capacity Growth Rate

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Traffic matches capacity

Delta Air Lines (DAL) reported its January operating performance results on February 4. Last month, the airline’s traffic (revenue passenger miles) increased 5.9% YoY (year-over-year), in line with its capacity growth rate during the same period.

The latest data released by the company depicts 12 months of a continuous increase in traffic. It reported traffic growth in every month of 2018 except January. Last year, the company’s traffic growth rate was 3.5%, almost on par with its capacity growth rate of 3.6%.

The robust increase in Delta Air Lines’ January traffic was mainly driven by strong traffic growth in the domestic market. During the month, the airline’s traffic grew 7.6% in the US market. In 2018, the local region saw 4.9% YoY traffic growth.

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An improving US economy—as indicated by remarkable GDP growth rates, a healthy job market, and a steady rise in wages over the last year—has driven domestic travel demand. To capitalize on this growing demand, Delta Air Lines has been aggressively adding capacity in the local market. The company increased its US capacity by 7.7% in January. In 2018, the airline increased its domestic capacity by 5.2%.

International market traffic

Over the last few quarters, Delta Air Lines has been trying to focus on its most profitable transatlantic route. Therefore, the airline is enhancing its capacity in the Atlantic region while reducing the same across the Pacific and Latin American regions, causing sluggish growth in its international traffic.

In January, Delta’s international traffic increased 3.1% mainly due to a 4.5% increase in the Atlantic region, a 4.4% increase in the Pacific region, and a 0.4% increase in the Latin American region. Last year, the company’s international traffic grew 1.1% due to a 3.9% increase in the Atlantic region, which more than offset the falls of 1.8% and 1.7%, respectively, in the Pacific and Latin American regions.

Outlook

Lower airfares have been a key growth driver for Delta Air Lines’ traffic in the past three years. Moderated oil prices are expected to lead to lower input costs for the company, which should help it continue offering low airfares to its customers.

Among big airline companies (JETS), Southwest Airlines (LUV), United Continental (UAL), and Hawaiian Holdings (HA) haven’t reported their January numbers yet. In December 2018, Southwest Airlines, United Continental, and Hawaiian Holdings registered YoY traffic increases of 1.2%, 6.9%, and 5.1%, respectively.

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