Delta Squeezes Capacity, Makes A Profit

Delta Air Lines officials vowed Tuesday to keep the hammer down on a drive to eliminate unprofitable routes, a strategy that has steadily eroded traffic at the Memphis International Airport hub.

Delta said the strategy, which executives call capacity discipline, helped the carrier to a $549 million profit, despite a $1 billion increase in fuel costs during three months ending Sept. 30.

"Our strategy has been to reduce flying in those markets which cannot generate adequate returns in a high fuel price environment," president Ed Bastian said during a quarterly earnings call.

"We will not chase market share at the expense of earnings. I'm pleased to say that plan is working."

Delta has been ramping down its presence at Memphis, cutting about 25 percent of its flights from the city and 8-10 percent of overall seat capacity from the former Northwest Airlines hub.

The next round of reductions, scheduled Jan. 4, will put the airport at about 185 daily departures for all passenger airlines, including 149 flights by Delta and regional partners.

Northwest and Delta together operated 238 daily flights from Memphis before their merger integration began three years ago. In 2000, the airport had 325 daily departures.

Capacity reductions, coupled with higher ticket prices to cover fuel costs, will continue in 2012 across the Delta system, CEO Richard Anderson said. The carrier expects to offer 2-3 percent fewer seats than this year.

Bastian said capacity in the current quarter, ending Dec. 31, is down 4-5 percent overall, including 10-12 percent in trans-Atlantic, 3-5 percent in domestic and flat in trans-Pacific. The only growth area is Latin America, up 4-6 percent.

Officials said trans-Atlantic cuts have fallen on Eastern Europe and Middle East while service has been maintained from Paris, Amsterdam and Rome.

Asked to discuss the Memphis-Amsterdam nonstop, which was cut from daily to four days a week in September, executive vice president for network planning, revenue management and marketing Glen Hauenstein said:

"We're looking at the financial performance real time on this. It seems to be doing better with the reduced frequency level, and so we'll continue with that and analyze how the data comes in in the peak winter.

"Of course we're not in the peak winter yet. We've got December and January to come, and I think it will be a better question to ask next spring."

- Wayne Risher: (901) 529-2874

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"We will not chase market share at the expense of earnings."

Ed Bastian, president of Delta Air Lines

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