Delta Air Lines Inc. said Tuesday that raising fares should allow it to make up for the higher fuel prices that drove a $318 million loss in the first quarter.
Airlines have been raising fares all year, as the price of fuel climbed. Delta’s fuel bill rose 29 percent, or $483 million, compared to a year earlier. Revenue rose 13 percent to $7.75 billion.
Delta President Ed Bastian said “aggressive fare actions” should allow it to cover the higher cost of fuel. The airline’s goal is to raise fares enough to cover “the full cost of fuel on every flight, every day,” according to a memo to employees from Chief Financial Officer Hank Halter.
Airlines have raised fares seven times this year as their fuel bills have increased. They’re walking a line between covering their higher costs and scaring away price-sensitive customers.
Delta, based in Atlanta, increased flying capacity 5 percent during the first quarter, and it will rise as much as 4 percent during the second quarter, compared with the same periods last year. Flying cuts will kick in during the second half of the year, when Delta plans to shrink capacity by 4 percentage points. It said reductions would be focused in markets where fare increases have not kept up with rising fuel costs.
The loss for the quarter that ended March 31 worked out to 38 cents per share. A year ago, Delta lost $256 million, or 31 cents per share. Analysts surveyed by FactSet expected a loss of 50 cents a share and revenue of $7.61 billion.
Delta has hedged 49 percent of its fuel for the second quarter, 40 percent for the third quarter, and 20 percent for the fourth quarter. Airlines hedge by buying derivative contracts that they hope will limit their fuel costs.
Last week United Continental and American reported quarterly losses on fuel expenses as well. Southwest Airlines Co. reported a small profit. US Airways Group Inc. was also expected to report results on Tuesday.