Airline stocks were weaker on Monday after Delta Airlines reported earnings. It wasn’t the gains in income and sales that had investors worked up – the same gains that had CEO Richard Anderson declare: “Delta’s profit this quarter is our best result in a decade.” No, it was a declaration by the company that its mainline business (it’s business but not that of the regionals it works with) should see capacity growth in the next quarter – domestic growth from 1% to 3% and international growth of 2% to 4%.
The airline industry was plagued in recent years by having too much capacity – flying too many planes with empty seats. That, of course, spells a lack of profitability. They began to cutback on capacity a few years back when fuel prices skyrocketed and they continued the paring back process as the recession hit. Clearly, investors feel the industry should sit tight on the capacity issue until there is clear evidence more planes are needed in the skies.