Air fares aren’t coming down, Delta Air Lines said Friday, even though the cost of jet fuel has fallen sharply.
In its second-quarter earnings report, the airline said its various measures of fares are up 11%-12% due to strong demand for travel, and that it sees “sustainability” in those fares. Delta CEO Ed Bastian said the strong demand for travel will keep fares high.
“Airfares are a function of supply and demand,” Bastian told CNBC in an interview Friday. “The demand set is really strong.”
Fuel prices paid by Delta increased 75% compared to a year ago throughout the quarter as the US-Israeli war with Iran led to a spike in oil prices. Fuel is the second largest cost for airlines, behind only labor. It raised Delta’s adjusted fuel expense in the quarter by $1.9 billion. But the strong fares lifted revenue from passengers by $1.7 billion, as overall revenue rose $3.1 billion.
Delta is projecting fuel costs in the current quarter will be down 20% from the adjusted fuel price it paid in the second quarter, as oil prices have retreated to near the levels they were before the war. Jet fuel spot prices are down 36% from their peak.
