Delta CEO warns of uncertainty associated with financial turmoil

Washington DC
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Delta chief executive Richard Anderson is warning that the carrier at this point is unsure how the global financial crisis will ultimately affect demand for air travel, but believes now more than ever its planned merger with Northwest will provide the combined carrier a competitive advantage against other airlines.

Anderson in his latest weekly update to employees says: "We're in unchartered waters."

Yet he stresses the merger with Northwest Airlines supplies the carriers with an improved ability to navigate through uncertain times.

The chief executive highlights the deal allows for expansion of the combined carrier's international network allowing the new entity to take market share away from other carriers.

During a third quarter earnings call last week Delta president and chief financial officer Ed Bastian explained current demand in international markets is "softening a bit" as book load factors are down two-to-four points in November and December.

But advance yields in those markets are "maintained at a very strong level, and all-in support of fourth quarter RASM [revenue per available seat mile] growth target for international is roughly 10%".

With respect to 2009 and the current economic environment Bastian says Delta is working through a number of different scenarios.

"A significant decrease in demand is some ways is easier to work with than $150 oil as it was this past summer," says Bastian.

Delta also believes it has an advantage with the diversity of its international network, as some of its competitors are more entrenched in the London-New York market, "which we believe will probably be disproportionately hit by the turmoil in the financial markets", says carrier executive vice president of network planning and revenue management Glen Hauenstein.

The carrier's head of network planning believes Delta is insulated in some areas, and says its strategy is to focus on accretive markets while "trimming out capacity at the bottom end when we see things aren't working".

Again highlighting Delta's international network diversity Hauenstein says: "I'd much rather be sitting with a market basket where we have 41 trans-Atlantic markets than sitting where we are fully focused in one or two lane corridors that have been historically highly dependent on the financial sector."