Delta is getting travelers to shell out more for seats

Key Points
  • Delta says more travelers are paying up for its premium seats.
  • An increase in fares is helping the carrier offset a surge in fuel costs.
  • Delta's third-quarter profits topped analysts' expectations.
A Delta Air Lines plane lands at Los Angeles International Airport on July 12, 2018 in Los Angeles, California. 
Mario Tama | Getty Images

Delta Air Lines' fuel bill surged in the last quarter and travelers were willing to pick some of the tab.

Higher airfares and brisk sales of seats in premium sections of the plane like business and first class helped the second-largest U.S. airline offset its fuel costs as it posted record revenue and profits that topped Wall Street's expectations for the three months ended in September. Delta shares were up more than 5 percent midday Thursday, more than the airline's competitors.

Delta said it was able to cover about 85 percent of the increase in fuel costs, partly thanks to higher fares. Revenue from business class and higher-end coach seats with more legroom rose nearly 20 percent in the last quarter, compared with a 3 percent increase in revenue from coach, Delta said. Its revenue available per seat mile, a key industry metric of revenue for each seat an airline flies one mile, rose more than 4 percent from a year earlier.

It is welcome news. The sector has largely lagged the broader market as investors fretted about weak profit growth amid more expensive fuel, generally airlines' second-biggest expense after employee salaries.

But Delta customers are also opting for more expensive seats in coach and the airline on Thursday said it plans to give travelers more options to buy up.

Airlines have been slicing the coach cabin into new classes of service in recent years, offering travelers more legroom and amenities at the high end, and restrictive so-called basic economy fares at the low end that don't allow changes and force travelers to board the plane last.

Last year, Delta launched premium economy on some international flights, which offers travelers bigger seats, more legroom, amenities kits and larger seatback screens. Starting this quarter, Delta travelers will be able use frequent flyer miles to upgrade to that class of service. Fares vary but a search for a round-trip ticket between Detroit and Tokyo in early November showed Delta's premium economy fare was about $2,200 compared with $1,200 in for a regular coach seat.

Demand has never been healthier for our brand and product, says Delta CEO