SkyTeam JV key to revenue for Delta as it cuts international flights

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Management at Delta Air Lines believes its joint venture with fellow SkyTeam partners Air France-KLM will allow the carrier to recapture revenue on international flights Delta plans to eliminate this fall as part of a 15% reduction in international capacity this year.

Delta in June expanded its planned cuts in international capacity for 2009 from 10% to the current 15% projection, with the majority of the shrinkage occurring beginning in September.

Today during an earnings call with analysts Delta president Ed Bastian reiterated earlier projections of a 20% reduction in transatlantic capacity and a 12% reduction in available seat miles to the Pacific.

Carrier EVP of network and revenue management Glen Hauenstein explains the structure of the SkyTeam joint venture "allows us to recapture a significant amount of that revenue, not only on the transatlantic sector but any traffic that's transiting into or beyond Amsterdam or Paris as well".

Hauenstein stresses Delta management believes the "recapture rates on the displaced revenue will be very, very high".

At the time the SkyTeam members finalised their joint venture they said the scheme would account for 25% of total transatlantic capacity.

The international markets Delta has decided to exit are both mature routes and new markets the carrier has added during the last couple of years, Hauenstein explains.

Delta has previously said it plans to cut flights from JFK to Edinburgh, Cincinnati to London Gatwick/Frankfurt and Atlanta to Seoul and Shanghai. The carrier also plans to shift New York-Kiev and Atlanta-Moscow flights from year-round to seasonal.

Responding to a query about international flights from Delta's Salt Lake City hub Hauenstein says Delta plans to retain flights from the airport to Charles de Gaulle through the winter. "We are quite pleased with the demand that we've had there," he notes. "It is a very good performer this summer."

Delta's flights from Salt Lake City to Tokyo Narita have encountered challenges from weak demand spurred by the H1N1 virus. "A lot of the traffic we had counted to be on that flight was coming from Asia to the Western US," Hauenstein explains.

As a result of traffic not materialising on the Salt Lake City-Narita route, Delta is cutting its offerings to four weekly flights beginning in the winter. Hauenstein says the carrier could adjust capacity if "H1N1 eases, and the Japanese return to travelling".

Bastian estimates Delta took a revenue hit of $125 million-$150 million from H1N1 during the second quarter. Previously he said the virus significantly weakened point-of-sales bookings in Asia as passengers were spooked by a pressing recall of the spread of SARS earlier in the decade.