Delta plans higher fares to counter fuel costs

By Dow Jones Newswires
Posted Feb. 3 at 1:10 p.m.

A senior Delta Air Lines Inc.  executive said Thursday that more fare increases are needed to counter escalating fuel costs as the airline pares plans to boost capacity this quarter.

Ed Bastian, president of the second-largest U.S. airline, said Delta had recouped half of the rise in jet fuel costs in the last two months through higher fares.

Delta said it planned to add 3 to 5 percent more capacity this quarter from with last year, instead of the  5 to 7 percent outlined two weeks ago.

The airline has said it would be “responsible” about adding flights, though it has said a combination of capacity discipline, higher industry fares and rising ancillary revenue would help it weather the latest increase in fuel prices.

The U.S. industry has initiated four rounds of price increases in the last 45 days, and Bastian said at an investor conference that another was launched this week. The pressure from crude oil’s rise has been exacerbated by a widening “crack spread” with refined jet fuel.

Domestic carriers typically follow rivals’ pricing moves, though some increases do not “stick” if an airline fears it will lose market share.

Bastian also said it would be the latter half of the year before Delta makes a decision on replacing large parts of its short-haul fleet. The airline has asked manufacturers to bid on a potential order for 200 or more narrow-body aircraft.

Delta shares were up 3.3 percent, at $11.72, in afternoon trading.

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