United Airlines (UAL) And Delta Airlines (DAL) Adapt To Falling Demand Of Transatlantic Winter Flights

Delta and United Airlines plan to use smaller planes or even cut transatlantic flights in winters, according to statements on Friday


In an interview with Reuters on Friday, United Continental Holdings Inc. (NYSE:UAL) said that it planned to account for the slide of the US dollar by reducing transatlantic flights of its United Airlines after the summer season.

The company said it planned to suspend flight operations from Newark to Stockholm and Oslo from September this year to May next year. Additionally, it planned to suspend one out of two daily flights from Newark to Paris starting October 25 to March 26, 2016, besides using Boeing Co’s (NYSE:BA) 777-200 aircraft. United airlines would start implementing these flight schedule changes by May 9 this year.

In the first quarter fiscal 2015 (1QFY15), the company reported $7.4 billion revenue from passengers with 0.5% Year-over-Year (YoY) growth and passenger revenue per available seat mile (PRASM) of $11.86 with 0.9% YoY growth.

Winter showed reduced activity with a drop in average daily hours of utility of each aircraft by 0.5% compared to the previous year. Fuel consumption declined by 1.2% YoY to 737 million gallons in 1QFY15, while consolidated mainline and regional passengers declined 1.2% to 31.5 million.

United Airlines also expects deliveries of nine Boeing 787-9 Dreamliners by March next year to be used on routes to Europe, Los Angeles, Denver and South African cities from Houston. A company representative also said that this arrangement of planes would allow United Airlines to reduce expenses by rearranging the smaller Boeing planes to fly transatlantic routes in winters when demand for tickets is low.

Investors of US Airlines were pleased by the announcement on capacity cuts, confirming that there was ample demand for seats in certain markets. Previous winter flights lacked demand leading to poor financial results of US-based airlines, generally.

Similarly, Delta Air Lines, Inc. (NYSE:DAL) also plans to cut 3% international capacity by 4QFY15. The company said that it would reduce its capacity by 15-20% from Brazil, Japan, India, Middle East and Africa, while suspending its service for Moscow for the winter season.

Delta Airlines had a positive 3% YoY change in its consolidated passenger revenue in 1QFY15, with a 5% increase in passenger capacity over last year same quarter. Delta also reported a decrease of 2% in its PRASM in 1QFY15 while expecting a 16% to 18% increase in operating margins by 2QFY15 as the summer seasons approaches.


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