The rapid expansion of U.S. airlines since the COVID-19 pandemic has reached a self-imposed pause, as highlighted by Delta Air Lines CEO Ed Bastian on Wednesday. During a recent quarterly earnings call, Bastian noted that macroeconomic uncertainty surrounding global trade has led to a significant slowdown in Delta's multiyear expansion efforts, which previously included the introduction of new international markets and an enhanced focus on Austin-Bergstrom International Airport (AUS).
As we approach 2025, Bastian expressed optimism for another year of strong growth. However, the current economic climate has cast a shadow over these ambitions, indicating that growth has largely stalled due to the broader economic uncertainties related to global trade.
According to Glen Hauenstein, Delta's president, the airline's schedules will remain mostly intact for the remainder of the second quarter, which runs through June. There may be some minor adjustments, but after June, Delta plans to shift its focus from growth to enhancing the profitability of its core operations. This decision comes amid rapidly declining economic indicators in the U.S., including significant drops in major stock indices and the recent decline in The Conference Board's consumer outlook index, which fell to its lowest level in 12 years.
In response to the economic downturn, Delta anticipates cutting domestic capacity, especially in the latter half of the year. Most of these cuts are expected to start after August 15, aligning with the return of students from summer break in the southeastern U.S., where Delta has a strong presence. The airline has revised its capacity growth forecast for the second half of 2025 from an increase of 3% to 4% to a flat year-over-year projection.
Hauenstein stated that Delta's initial cuts will focus on adjusting flight frequencies based on demand. For example, the airline may reduce the number of flights on low-demand days while maintaining full service on peak travel days. "We're going to eliminate unprofitable flying wherever that is," Hauenstein emphasized during the call.
To further decrease growth, Delta plans to accelerate the retirement of older aircraft. The airline intends to phase out at least 30 older models, including Boeing 757s, Boeing 767s, Airbus A319s, and Airbus A320s, in 2025, as stated by Dan Janki, Delta's chief financial officer.
Despite the challenges in domestic travel, international travel demand remains robust for Delta. Executives noted that American travelers continue to seek international flights, even as travelers from Canada and Western Europe show decreased interest in visiting the U.S. Approximately 80% of Delta's international revenues originate from U.S. travelers, ensuring a solid booking foundation for the peak summer season.
Hauenstein pointed out that the demographic of travelers currently flying internationally skews older, with Baby Boomers driving demand. This cohort tends to have more disposable income and a desire to travel, which contributes to the resilience of international travel.
Delta is set to introduce new service to Catania Airport (CTA) in Sicily, along with at least eight additional routes to Europe this summer. Next winter, the airline plans to expand further with ten new routes to Mexico and the Caribbean. Hauenstein also noted that premium travel demand has remained strong, even as economy travel has softened.
In response to concerns about tariffs, Bastian assured that Delta would not incur tariffs on any aircraft deliveries. The airline is set to receive 43 scheduled aircraft deliveries in 2025, all from European manufacturer Airbus. This includes various models assembled in locations such as Toulouse, France, and Mobile, Alabama.
To avoid import duties, Delta has historically taken strategic measures, such as dedicating aircraft to international routes, thereby circumventing tariffs on domestic flights. Bastian expressed hope for a resolution to the ongoing tariff issues, stating, "I'm hopeful that sanity will prevail, and we'll move through this period on the global trade front relatively quickly."
As Delta Air Lines navigates these tumultuous waters, the focus remains on adapting to market conditions while maintaining profitable operations.
