Delta Air Lines, Inc. (NYSE:DAL) announced that it will stop expanding its flight capacity next year, in an effort to sell more seats at higher prices and fill up more seats.
The company said it will grow its capacity in the range of 0-2 percent in 2016, as compared to a surge of about 3 percent this year.
Stagnant overseas demand for U.S. airlines have forced them to limit foreign services so less discount fares are required to sell out flights. Spending power of foreigners in the U.S. has been affected by a strong dollar and decreased the value of foreign revenue in terms of dollar.
Speaking about the latest capacity plan of the company, an analyst at Sterne Agee CRT, Adam Hackel stated that this is a key positive, not only for Delta (DAL), but also for the industry.
Delta shares closed higher after the third-biggest U.S. airline announced an adjusted profit of $1.38 billion for the third quarter, representing a jump of 36 percent from the same period last year, and also above consensus forecast.
Earnings of U.S-based carriers have improved in the past year as fuel expenses have dropped and companies have taken measures to balance flights and demand. Costs for additional services have also helped to boost profit.
The Atlanta-based airline reported its measures to introduce fares that carry a price based on various facilities they include like priority boarding, added $75 million to its overall sales of $11.11 billion in the latest quarter. Though, sales slipped 0.6 percent from last year.
Delta posted earnings of $1.74 per share in the third quarter that surpassed consensus forecast of $1.71 per share. Net earnings were $1.32 billion, while operating margin was 21 percent. Looking forward, the company is anticipating operating margin in the range of 16-18 percent for the fourth quarter.
