Delta plans 4% capacity cut

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Delta Air Lines plans a 4% network-wide cut in capacity following the 5 September US Labor Day holiday due to higher fuel costs, says company CEO Ed Bastian.

"Sitting and hoping that high fuel prices are going to go away or that high fuel prices are going to fall is not a strategy," said on Bastian on 19 May at the Bank of America Merrill Lynch Global Transportation Conference in Boston.

Bastian says the carrier plans to move ahead with retirement of 140 domestic aircraft, along with a 1-3% year-over-year capacity reduction by "right sizing a couple of our hubs" with Memphis departures set to fall by 25%.

Delta's trans-atlantic capacity is also set to fall by 10-12% through market cancellations and frequency reductions, carried forward in conjunction with reductions from SkyTeam alliance members, Air France/KLM and Alitalia.

Capacity across the Atlantic had been scheduled to grow 7-8% in late 2011, said Bastian, but total joint venture capacity is now set to fall 7-9%.

While Pacific capacity had been up double digits over the last 18 months, Delta will reduce capacity by 1-3%, driven by the slow recovery of the Japanese market in the wake of the 11 March earthquake and tsunami.

In contrast, Latin American capacity will grow 2-4% taking advantage of "strong revenue and economic growth patterns" in the region, said Bastian, who added that margins on those routes are "some of the strongest in the business".

Bastian said Delta is now forecasting an "all-in" price of $3.20 per gallon of jet fuel, including transportation and taxes.