Delta Air Lines came roaring out of bankruptcy court protection boasting a new design and look, a new website, a new stock market ticker and assurances that it would not grow too quickly.
After 19 months in reorganisation, though, the new Delta still looks very much like the old Delta, heavily dependent on its Atlanta Hartsfield/Jackson hub and still pushing its fast-growing operation at New York JFK.
Investors greeted its new shares, which began trading after Delta exited bankruptcy at the end of April, with cautious optimism. Its chief financial officer, Ed Bastian, sought to reassure the financial community, telling an early May conference that "when I talk about growth, we are going to be doing it in a disciplined manner".
Bastian moved to calm fears that the carrier's international expansion may be too Europe-oriented. Most of Delta's growth in 2007 and 2008 will be in Asia, Africa and the Middle East, and Bastian says the carrier is banking on gaining access to mainland China.
|
|---|
Bastian adds that most of the airline's overseas growth would be "self-funded" as it takes aircraft from domestic service and reconfigures them for international flying. By next year, international flying will account for more than 40% of its capacity, up from 30% now and up from 20% two years ago.
"We serve more destinations in the world than any other airline and we'll continue to build on that," says Delta vice-president network planning Bob Cortelyou. "Delta has always been the largest European carrier now we're the largest international carrier."
Delta in particular is targeting destinations no US carrier currently serves. This year Delta has become the first US carrier in Accra, Dakar, Dubai and Johannesburg. In December it will become the first US carrier to serve Lagos.
But Delta officials acknowledge its international unit revenues only rose by five percentage points in the first quarter, although its international capacity was up by more than 10 percentage points. JP Morgan analyst Jamie Baker says Delta's forecasted 5.6% operating profit margin is "unremarkable" and nearly identical to margins at Continental and US Airways, and adds that Delta's labour unit costs are above industry averages.
Delta also has quietly made some big domestic moves, most notably increasing its presence at Los Angeles. By late this year it will have 100 daily flights from Los Angeles, double the level of a year ago. It is spending heavily on terminal improvements there, at Atlanta and at New York JFK. It is re-equipping domestic long-haul aircraft with in-flight entertainment at each leather seat and galleys. Its international fleet is being equipped with a new business class, including lie-flat seats.
Source: Airline Business
