Delta's UK woes signal tougher times for airlines' trans-Atlantic business

Thu Jul 14, 2016 5:32pm EDT
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By Jeffrey Dastin

(Reuters) - Delta Air Lines Inc's decision to sell fewer seats from the United Kingdom this winter highlights the threat that Britain's planned exit from the European Union and new airline competition pose to U.S. airlines that have raked in cash from flights across the Atlantic.

Air travel between the United States and Europe has churned out steady profits in the past decade since top U.S. carriers deepened partnerships with European rivals, consolidating what had been a fragmented, money-losing market outside the summer tourist season.

With immunity from U.S. antitrust law, the airlines in four trans-Atlantic joint ventures have shortened layovers, set prices and distributed revenue among them. But a combination of new entrants and economic uncertainty stirred up by Britain's 'Brexit' vote threaten their business.

According to travel data analysis company ForwardKeys, Europe was the only region that saw fewer advance bookings by travelers from other continents for the first five months of the year.

As of May 31, long-haul bookings to Europe for summer trips were down 2.1 percent this year, compared to bookings made at the same time a year ago, the ForwardKeys study found.

A more than 10-percent drop in sterling against the U.S. dollar since the June 23 Brexit vote has chopped some $40 million off Delta's annual UK sales, the company said on Thursday.

In response, it said it will cut 6 percent of its U.S.-UK seats this winter.

"We have seen some strength in the U.S. point of sale to the UK as the pound has deteriorated," Chief Executive Ed Bastian said on an analyst call. "Likewise, we've seen some reduction in our UK point of sale coming to the United States, and that's why we're making certain of the capacity adjustments combined with overall high levels of capacity in the North Atlantic."   Continued...

Delta planes line up at their gates while on the tarmac of Salt Lake City International Airport in Utah September 28, 2013. REUTERS/Lucas Jackson/File Photo