CPI June Stats Show Airline Fares Fell 8%. Nobody Told Delta Air Lines.

The U.S. Labor Department said Wednesday that airline fares fell 8.1% in June. This was news to Delta Air Lines
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.

The Labor Department “methodology is a sample of a sample: we’re not seeing the same,” Delta President Glen Hauenstein said Thursday on the carrier’s second quarter earnings call. “It’s a different data point than what we have.”

Delta President Ed Bastian added, “Last May and June, demand had just turned in a crazy kind of way.” He said demand had been low until suddenly people resumed traveling. In May and June 2022, fares rose 30% to 40% to 50%, he said, noting, “That’s obviously not sustainable.”

In a news release detailing Consumer Price Index statistic, the DOL Bureau of Labor Statistics said, “Several indexes declined in June, led by the airline fares index, which fell 8.1 percent over the month following declines in April and May.” The decline in airfares helped keep the June CPI increase to a minimal level of O.2%, the agency said.

Delta’s top executives responded to a question from Goldman Sachs airline analyst Catherine O’Brien, who said she had not seen any correlation in her data to the DOL data.

Delta kicked off airlines earnings reporting on Thursday and continued the narrative that the airline economy remains strong, fueled by continuing high demand.

“The industry backdrop remains constructive,” Bastian said in his opening remarks. “Air travel demand is strong and the consumer is in good financial shape, particularly the premium consumer base that we target. After years of spending on goods, consumers want to travel. It’s their number one big ticket purchase priority and they desire premium experiences. No one provides this better than Delta.

“At the same time, aviation infrastructure is still fragile, “ he said. “The industry continues to face multiple constraints across the supply chain — aircraft delivery delays and training issues. As a result, we see a significant gap that between the supply that is in place and what demand could sustain. And we suspect this gap will remain.”

Hauenstein, looking ahead, said, “We see strong demand both domestically and internationally as far as we can see.” Leisure traffic traditionally falls after Labor Day but, “We see very robust leisure demand continuing through the October period,” he said. Business traffic may also be strong in October and following that, “We have good bookings for the holidays,” he said.

Hauenstein didn’t bite when an analyst asked whether Delta would benefit from the pending shutdown of American Airlines’ Northeast Alliance with JetBlue, which appears to ensure that the New York market will be dominated by Delta and United for the foreseeable future.

“We compete well in New York,” Hauenstein said. “We’re very confident we’ll be able to compete well in New York, which has been our long-term strategy, and we’re not deviating from that.”

Shortly after noon on Thursday, Delta shares were trading up about 1% at $48.60. Before the call, O’Brien wrote, “Delta reported June Q adjusted EPS of $2.68, above the high end of its recently improved guidance of $2.25 to $2.50, and ahead of GSe/FactSet consensus of $2.40. The beat vs. our forecast was due to better revenue and non-operating costs.”

Also before the call, Cowen
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analyst Helane Becker anticipated that shares would increase and noted that shares “continue to look attractive at only 6.6x” fiscal year 2022 earnings per share.