May 17, 2012 / 1:28 PM / 7 years ago

Delta Air to trim capacity on trans-Atlantic routes

(Reuters) - Delta Air Lines Inc (DAL.N) will cut capacity on trans-Atlantic routes another 5 percent after Labor Day in September, a “proactive” measure aimed at blunting the risk of a weak European currency and soaring fuel costs, airline president Ed Bastian said on Thursday.

Speaking on a webcast of a Merrill Lynch transportation conference, Bastian said the company’s total full-year capacity - the number of seats it sells - will be down 3 to 4 percent. The second-largest U.S. airline had previously said it would cut 2012 capacity by 2 to 3 percent.

The airline industry has been battered in recent years by soaring fuel costs. But carriers fought back in 2008 with steep capacity cuts on unprofitable routes to help trim costs and bolster fares. That capacity discipline carries on today.

“It’s a proactive measure. We’re not seeing any signs of weakness per se in any one region,” Bastian said.

But he noted potential headwinds related to weakness in the euro, which cuts the value of Delta’s sales in Europe when converted to U.S. dollars. Bastian also pointed to the risk of rising fuel prices.

The company had previously said it would trim its trans-Atlantic capacity by 7 to 8 percent for the full year but had not given a specific forecast for the fourth quarter. Other light capacity cuts would occur on Delta’s Pacific routes, Bastian said.

He said the company estimates its May year-over-year unit revenue improvement at about 7 percent, which is slower than the pace of improvement in recent months.

“We had some very healthy year-over-year revenue improvements in the prior year, and so the performance that we’re generating sits on top of that,” he said.

Bastian and other U.S. airline executives who spoke at the Merrill Lynch conference noted strong summer travel demand.

Delta said last month it will buy a Pennsylvania oil refinery for $180 million as part of a plan to cut fuel costs.

Airline shares were broadly weaker on Thursday afternoon, with Delta shares down 7.1 percent at $10.58 on the New York Stock Exchange.

Reporting By Kyle Peterson in Chicago; Editing by Maureen Bavdek and Matthew Lewis

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