Delta blames rivals for profit drop amid market overcapacity

Despite expectations that other airlines will reduce capacity, Delta plans to grow faster than its revenue projections suggest. For the September quarter, Delta anticipates capacity growth of 5% to 6% and revenue growth of 2% to 4%.

This situation raises questions about air travel commoditization. If capacity is indeed an issue as Delta claims, it implies that air travel is commoditized despite their long-standing message of offering a differentiated product.

Delta's second-quarter results indicate that much of its product remains a commodity. The airline industry operates with high fixed costs and is highly sensitive to fuel price changes. Most seats sold are economy class where price is a significant factor for consumers.

Before the pandemic, Delta attempted to de-commoditize economy class by offering enhanced services such as hot towels and amenity kits on long-haul flights; however, these efforts have since ceased.

Delta has built a brand around premium products but faces competition from other airlines offering superior business class experiences. The business class seats on their Boeing 767s lag behind those offered by American Airlines, United Airlines, JetBlue Airways, British Airways, Air France-KLM Group, and Air Canada.

Hauenstein highlighted their partnership with American Express during an earnings call: “American Express remuneration for the quarter was $1.9 billion, up 9% year over year.” However, SkyMiles loyalty program does not appear to be a strong differentiator compelling customers to choose Delta over competitors.