Delta CEO: Airfares will go up further this year

By Dave Hannon -- Purchasing, 4/23/2008 9:31:00 AM

Delta Air Lines CEO Richard Anderson says domestic airfares need to be 15-20% higher than they are currently just for airlines to break even with fuel costs at record level. He admits those kinds of fare hikes likely would decrease demand for travel, which in turn would cut airlines’ revenues further and force them to reduce service routes.

Anderson made the statement to reporters while he and Doug Steenland, CEO of Northwest Airlines, were in Washington to address regulators on Delta’s proposed merger with Northwest. Steenland says that in the wake of high fuel costs, airlines’ cost-cutting measures "have largely been exhausted” and that fare hikes are the only viable solution.

Delta this week reported a first-quarter loss of $6.4 billion, including a massive $6.1 billion bankruptcy charge the airline is taking related to its 2007 emergence from bankruptcy. In the company’s earnings statement, CFO Ed Bastian says, “We have moved quickly to mitigate the short-term impact of higher fuel prices by further reducing domestic capacity. We clearly need to do more.''

That “more” likely means fare hikes. Since Dec. 20, air carriers have raised fares nine times, according to BestFares.com, and five of the six major U.S. airlines this week raised fees and surcharges for checking a second bag. And service levels are expected to deteriorate further, say some industry experts, as the airline industry struggles to stay afloat.

“It's going to be a rough summer," said Terry Trippler, a Minneapolis-based travel expert in an Associated Press report. "It's going to be one where you've got to plan another day into your travel schedule" just to prepare for schedule chaos. And, as Purchasing.com reported a week ago, travelers and buyers are concerned that the Delta-Northwest deal will impact service levels.