Airlines warned fuel prices were a growing threat, but it just became clear how terrible the situation has become
- Delta Air Lines reported second-quarter 2018 profits of $1.025 billion on $11.775 billion in operating revenue.
- Even though revenues are up, profits are actually $161 million lower than the same period in 2017.
- Much of this can be attributed to the increase in fuel prices.
- The increase in costs for airlines could be passed on to consumers.
The price of crude oil has skyrocketed more than 50% over the last year and the effects on the airline industry are expected to be profound.
Now we have a better idea of just how profound.On Thursday, Delta Air Lines reported a second-quarter 2018 profit of $1.025 billion on $11.775 billion in operating revenue.
Even though these numbers show Delta to be a very healthy airline, you don't have to dig very far to see underlying effects for fuel prices.
For example, Delta $11.775 billion is in Q2 revenue is a record for the company and 10% higher than the same period last year.
However, profits for the quarter are actually down $161 million or 14% compared to Q2 in 2017.
And much of that can be attributed to the fact that Delta spent $654 million more on fuel than it did during Q2 last year. That's a 39% jump.
For the year, Delta says it expects to spend an extra $2 billion on fuel.American, United, and Southwest are expected to report their earnings in the coming weeks.
For much of the year, airline CEOs have cautioned that escalating fuel costs will result in fewer flights and higher ticket prices.
Delta wasn't immediately available to comment on ticket prices. But, CEO Ed Bastian said during Thursday's earnings call with media and Wall Street analyst that the airline plans "a reduction of 50 to 100 basis points of underperforming capacity" from its fall schedule.
Translation. Delta is going cut down on certain flights that are less profitable as a way to compensate for higher fuel costs.