Delta's President Anticipates Higher Main Cabin Ticket Prices. 'The Numbers Must Add Up.'

Delta Predicts Higher Main Cabin Airfares Ahead

Delta Air Lines has indicated that slim profit margins on standard economy tickets are putting financial strain on the airline industry.

Main Points

• Delta President Glen Hauenstein stated that fares for main cabin seats are expected to increase, as low profitability is forcing airlines to reconsider their pricing strategies.
• During the last quarter, Delta generated more revenue from premium ticket sales than from basic economy fares.

Travelers may soon see an uptick in basic airfare prices, as these rates are unlikely to remain at their current levels.

According to Glen Hauenstein, President of Delta Air Lines (DAL), domestic main cabin seat prices are set to rise as airlines adapt to ensure their financial health. Many carriers, Delta included, are currently operating at a loss when it comes to transporting passengers, relying instead on additional revenue streams like co-branded credit cards. Losses are particularly pronounced in the main cabin, putting extra pressure on airlines that focus on this segment, Hauenstein explained during a conference call discussing Delta’s fourth-quarter performance.

“Eventually, this will have to change,” Hauenstein remarked, as reported by AlphaSense. “That’s simply the financial reality.”

Delta’s earnings for the fourth quarter fell slightly short of analyst projections, and the company issued a more cautious profit outlook than many on Wall Street had anticipated.

What This Means for Travelers

Reductions in main cabin capacity could affect more than just ticket prices. Changes in airline operations and industry consolidation may lead to fewer flight options on certain routes or less frequent departures.

Delta CEO Ed Bastian noted that bookings reached a new weekly high in early January, with increased demand for premium and business travel. However, factors such as the government shutdown in November and recent severe weather have made it harder to predict travel trends.

Sales of lower-priced seats, often favored by budget-conscious travelers, have been slow, according to Delta and other airlines. In contrast, demand for first-class and international tickets has remained strong, as wealthier customers seem less affected by economic uncertainty. In the fourth quarter, Delta’s revenue from premium tickets reached $5.7 billion, surpassing the $5.6 billion earned from basic fares.

Major airlines such as Delta and United Airlines (UAL) are cutting back on main cabin seating. Meanwhile, budget carriers Sun Country (SNCY) and Allegiant Travel Company (ALGT) are responding to the tough market by planning a merger. Bastian suggested that further operational changes are likely on the horizon.

“It’s been a gradual process, but it’s underway,” Hauenstein commented. “We’re seeing it through capacity cuts and industry consolidation, and these trends will persist until there’s a rebound in main cabin demand.”