Why flight tickets may stay expensive despite falling fuel prices: Delta Air Lines CEO says, 'As predicted...'
Travellers waiting for flight ticket prices to drop as fuel costs ease may have to rethink their expectations. According to Delta Air Lines CEO Ed
Travellers waiting for flight ticket prices to drop as fuel costs ease may have to rethink their expectations. According to Delta Air Lines CEO Ed Bastian, lower oil prices are unlikely to translate into cheaper airfares because the industry's pricing model has fundamentally changed Speaking with Moneywise, Bastian said today's fares are no longer driven solely by fuel costs. Instead, airlines are pricing tickets based on a wider set of expenses, including labour, airport operations, technology, and aircraft costs. He added that Delta believes its "current revenue momentum should remain sustainable even if fuel prices moderate." Delta reported a strong financial performance for the quarter, posting record revenue of $17.7 billion, up 14% year-on-year.
The airline also recorded $1.4 billion in pre-tax profit, despite facing its highest-ever quarterly fuel bill of $4.4 billion, a 77% increase from the previous year. It also raised its dividend by 15%, while earnings stood at $1.56 per share. Explaining the results, Bastian said airlines have become much faster at passing higher fuel costs on to passengers. "As we predicted, structural change has accelerated, enabling the industry to recapture this year's fuel cost inflation at the fastest pace of any recent cycle," he told Moneywise. He argued that the shift is long-term rather than temporary, signalling a lasting change in how airline tickets are priced.
Why airlines aren't rushing to cut fares Bastian said budget airlines are no longer in a position to trigger price wars because many are still struggling to cover their operating costs. According to him, the low-cost segment “still has to increase fares by another 5% to break even.” With expenses such as wages, airport charges, aircraft and technology remaining elevated, airlines have little incentive to compete by lowering prices. Instead, Bastian said the focus has shifted to "finding ways to secure higher revenues, not higher market share." Airfare inflation remains elevated Recent government data reflects the trend. According to the US Bureau of Labor Statistics, airfares were 26.7% higher in the 12 months through May and rose a further 2.7% during May.
Bastian maintained that fare increases are helping the industry recover rather than overcharge customers. He told Moneywise,"even after recent fare increases, airfares remain 10 to 15 points below overall inflation since Covid," suggesting airlines still see room for prices to rise. Also Read | Airlines will have to pass on fuel cost: IATA chief
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