:max_bytes(150000):strip_icc()/GettyImages-21636953321-95bb69053258417cb00e0a9f481dd638.jpg "Delta Expects to Get More Revenue from Premium Tickets Than the Main Cabin Soon")
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Key Takeaways
- Delta expects to make more revenue from premium airfare than the main cabin within a quarter or two, company executives said.
- Airlines are leaning into premium products and cutting capacity in the “coach” section, where they are using promotions to sell tickets.
The main cabin won’t be Delta’s main source of revenue for much longer.
Revenue from premium airfare will surpass main cabin sales within a quarter or two, Delta Air Lines (DAL) executives said Thursday. Revenue from premium airfare rose 9% year-over-year in the most recent quarter to $5.8 billion, while sales in the main cabin fell 4% to $6.1 billion, Delta said. Its results were the first from the major U.S. airlines.
The figures and forecast reflect changing sources of demand in the airline business. More affluent Americans have been booking trips abroad in better seats, while others cutting back are contributing to sluggish sales in the main cabin, airline executives have said.
“Most of our growth, if not almost all of it, will be in the premium sectors” next year, said President Glen Hauenstein, according to a transcript form AlphaSense.
What This Means for Consumers
Finding more affordable airfare may become harder as carriers cut “coach” capacity. Airlines have been offering promotions on seats in that section, but may no longer need to do so as much as the total supply shrinks.
Delta is focusing more on first-class seats by buying and retrofitting planes to expand its premium portfolio. The carrier expects these seats to remain sought-after and more profitable, Hauenstein said.
“What’s changed over the last 10 or 15 years—the premium products used to be loss leaders, and now they’re the highest-margin products, and really, in descending order of their premium-ness is their [profit] margin,” Hauenstein said.
Corporate travel picked up and sales improved in the main cabin of domestic planes in the third quarter, Hauenstein said. Several airlines have been cutting “coach” capacity in hopes that a reduction will prevent how often sales and promotions are used to sell seats in the main cabin.
Delta’s revenue grew 6% year-over-year to $16.67 billion in the latest quarter. It reported better results than expected and told investors Delta expects revenue to grow 2% to 4% year-over-year in the final quarter.
Shares of Delta were up more than 4% on Thursday. They have gained about 17% over the past year.
