Delta needs to look at its entire transatlantic product in
order to compete with upstart low-cost carriers, president Glen Hauenstein said during the
carrier’s earnings call Thursday.
“The closer we can get to what our customers want to buy in
every sector, the better off we will be,” he said.
Hauenstein’s remarks came in response to a question about the
carrier’s plans to deal long-term with the growth of discount transatlantic
carriers Norwegian Air and Iceland’s Wow.
During the third quarter, Delta’s unit revenue, the amount
of money collected for every mile each seat is flown, dropped 9.7% in the
transatlantic sector, more than it did in any other portion of Delta’s network.
The weak transatlantic figures are a result of geopolitical factors such a
terrorism and Brexit, but are also impacted by the growth of low-cost
competition.
Though the three major airline alliances still control more
than 80% of transatlantic capacity, Norwegian, Wow and Canada’s WestJet are chipping away at that dominance.
Between 2014 and the present, those three carriers have gone
from a combined offering of 1,635 transatlantic flights per year to 5,313
flights per year, according to the Wall Street Journal.
Hauenstein said that Delta, with its long established brand,
enjoys an advantage over the new LCCs, but it would benefit from offering a
range of new products in the transatlantic realm.
In May, Delta announced plans to roll out premium economy
cabins on international flights starting in mid-2017.
Delta doesn’t currently offer a version of its no-frills
domestic Basic Economy fare for international flights.
Hauenstein’s remarks came as the airline reported net income of
$1.26 billion in the third quarter, down 4% year-over-year. Total operating
revenue was $10.5 billion, off 5.6%, or $624 million, from last year and $110
million below analyst expectation. The carrier attributed $150 million of that
decline to losses from an August computer system outage that forced the
cancellation of 2,100 flights. A 5.3% drop in the average per-mile cost of
tickets also impacted revenue.
Delta countered its revenue decline with a $397 million drop
in fuel costs and a $380 million drop in operating expenses.
Delta recorded earnings of $1.70 per share during the third
quarter, beating expectations by 6 cents. The carrier’s stock was trading at
$39.77 shortly before noon, up 1.27%.
In other news from the earnings conference, CEO Ed Bastian said
that there is no behind-the-scenes story to Richard Anderson’s decision to
retire as board chairman. Anderson had held that post only since May, when he
retired as Delta’s CEO after a nine-year run.
“This was fully anticipated,” Bastian said.
Former Home Depot CEO Francis Blake, who has been on the
Delta board since 2014, has taken over the top board post.
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Correction: Delta president Glen Hauenstein spoke about the transatlantic LCCs on the call, not CEO Ed Bastian.