Delta Airlines Growth is Scary

the measure of whether DL's growth is too fast or not is whether they can deliver industry average or better revenue on the added capacity.

DL is maintaining or growing its system RASM at or above industry average - which could be possible because DL's core markets in its hubs is improving so strongly that they have plenty of capacity to add capacity - NYC and ATL are seeing particularly strong revenue growth - OR because DL's growth in new markets like SEA is really doing a lot better than a lot of people thought it would be.

Despite the repeated concerns that DL's capacity growth would not succeed in key industry markets, the evidence is overwhelming that DL not only is succeeding at its strategy of growing in key industry markets but intends to continue to do even more.

Hunter Keay is clearly far more preoccupied with what might happen to other airlines than whether DL is generating the best revenues for DL.

For instance, Delta’s capacity grew by 7% in American Airline’s (AAL) markets during the second quarter, by 9% in JetBlue’s (JBLU) markets, by 12% in United Continental’s (UAL) markets, and a whopping 40% in Alaska Air’s (ALK) markets.

guess what, Hunter? DL isn't the least bit worried about your concerns about DL's growth in other carrier's key markets.

DL IS interested in building its own strategic future.

btw, DL's summer buildup in SEA is already underway with capacity to LAX and SEA already up and a number of other cities such as DEN and in Alaska seeing new service or added service including on key AS routes like LAX-PDX and SEA-Hawaii.

And DL is apparently adding new service SEA-PSC to take advantage of DL's position of having service from upper cities in the upper Rockies and interior west not just from SLC but also to SEA and MSP, something that no other carrier can duplicate.

and that is just AS.

btw, it is Delta Air Lines - 3 words.
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actually, time has ALREADY shown that DL is putting fannies in seats and getting decent revenue for doing so.

Undoubtedly part of the reason DL has moved forward with its growth in SEA is because of what it was able to do at LGA a couple years ago when DL doubled the number of flights it operated and added DL flights into nearly every market that other carriers serve from LGA and in the process DL became the largest revenue and share carrier in the LGA local market.

DL has done the same thing at JFK without the transfer of the large number of slots at JFK.

DL's growth at SEA and LAX has been gradual and has shown success. in the most recent quarter for both LAX-SEA, DL's share continues to grow and while still 1/3 of AS', LAX-SEA is AS' largest market - and DL is getting average fares comparable to AS.

the same thing has happened in DFW-LAX which DL just started but where it is already building share and getting average fares that are above average.

DL is building its network and getting traffic proportional to capacity and revenue that are comparable to other carriers that serve the market.

and let's remember that other carriers are growing, esp. the low fare carriers.

The reason why the legacy carriers have lost share and seen their markets eroded in the past is because they didn't grow while the low fare carriers did.

AS has added a number of markets including to cities in the southeast and in SLC. AS' growth rate is far higher than any other carrier. and B6 has just announced a series of new routes including just today from AA and WN hubs/focus cities.

DL is growing because it, like other carriers, sees the opportunity to do so and because DL has to grow or else low fare carriers would be allowed to grow into key DL markets with share loss to DL. Share loss to LCCs almost always leads to a loss of pricing power and an eventual decline in profitability so DL recognizes it must grow. and it will, esp. as long as other carriers do the same.
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WorldTraveler said:
Undoubtedly part of the reason DL has moved forward with its growth in SEA is because of what it was able to do at LGA a couple years ago

the same thing has happened in DFW-LAX which DL just started but where it is already building share and getting average fares that are above average.
1.  No doubt that DL has had great success at LGA, but the key factor that helped here is that it is a protected market/airport, where the slots (or lack thereof) inhibit the amount of competition a carrier faces.  (I still can't believe that US could not make LGA work and basically gave it away).
2.  How is it possible for an average fare be above average?  Must be some sort of new math ... ... ...
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Average fares can mean industry average.

If carrier X gets average fares above industry average ie AA in the DFW and DAL to DCA market, carrer X gets an average fare premium

DL's fares in many SEA and LAX expansion markets are at or above industry average so DL's growth is not coming by trashing fares in the market

DL's growth in NYC has come the same way...

And yes it is hard to believe that US could not see the value in holding one fourth of LGA's slots

DL did
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Problem for Wall Street is that DL is and can show that it can successfully grow its network including in other carrier key markets which Wall Street doesn't like because airlines get their largest revenue premiums in the markets they dominate - usually their hubs.

again, DL like any company is interested in what works best for DL.

that is what competition is about, regardless if DL's success comes at the cost of other airlines.
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Hope777 said:
Crap YES... But its all about MONEY!   Wall Street makes this world go round!
not really. more and more analyst on wall street are likely Delta less and and less because management refuses to bow down to them. 
fact is as long as the airlines are profitable like they are I will take their word for it. Its not like Anderson is some new kid on the the block, he has show plenty of discipline while at Delta. (and IMO is still probably one of the most Capex/capacity disciplined executives in the industry)   
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and it doesn't matter what industry analysts think as long as DL is delivering returns for stockholders who ultimately look to analysts to evaluate the industry and DL is at the top of the airline industry - and above most other companies in terms of capital returns and financial performance and improvement.
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My cynical side always tells me that analysts like "Pumper" Keay and the rest criticize airlines like DL because of the harm that DL will inflict on their favorite airlines, which may be more heavily weighted toward the competition. Real success at DL necessarily means less success at AA, UA and/or WN, and these analysts are worried that someone might actually win the competition. The analysts would probably prefer that the airlines not compete vigorously and not introduce new capacity, so that everyone can jack up fares and everyone can prosper. That keeps their recommended stocks from faltering when DL succeeds in SEA, for instance.
^^^bingo, bingo^^^^

btw, that is realistic, not cynical

and airline stocks are getting hammered today ACROSS THE BOARD because of fears of excessive capacity growth - and the stimulus for today's pullbacks was comments from WN's CFO. going into the final hour of big board trading, WN stock is clocking a hefty 8% plus decline although UA stock is a tad worse off.
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here is one perspective on the sell off yesterday and the broader issue of capacity growth.

Delta Air Lines is the gold standard when it comes to airline management... Many investors are concerned since demand for air travel generally grows at the same rate as the economy so all of this added growth may cause prices to collapse in order to create enough demand to fill the excess seats.

Delta Air Lines has taken leadership on this issue and was the first US airline to announce significant cuts during its last earnings call...

Delta has the strongest fundamentals of any US airline currently and has lead the way for the whole industry in the United States as an example to follow.


there are also rumors that a pilot deal is near and that it may include the addition of larger Ejets to the mainline fleet either on a used or new build basis.

The strong dollar relative to the Brazilian Real makes buying from Brazil attractive to US airlines right now.
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