International travel demand is at record highs, and Delta's CEO says that won't change anytime soon
Demand for international travel is at record highs in the US, according to a consumer survey conducted by the Conference Board, despite the lingering conflict in Ukraine and burgeoning conflict between Israel and Hamas.
Delta Air Lines (DAL) CEO Ed Bastian expects the trend to continue.
"I think it's going to continue to stay strong," Bastian told Yahoo Finance in a recent interview (video above). "Some of the risks around European travel into the next year I'd say is something that we're guarded around. But we're not seeing any reductions in anticipated travel."
Foreign travel plans roared back after COVID-era lockdowns, and airlines continue to reap the benefits. Three of the US's largest airlines — Delta, American Airlines (AAL), and United Airlines (UAL) — reported record revenue in their quarterly results this year.
Bastian said he expects fourth quarter revenue to set another record for Delta, even as he says the industry is seeing signs of a more "normalized" pricing environment. Indeed, the latest Consumer Price Index released Tuesday found airfare prices dropped more than 13% over last year.
"We've got a very healthy mix of revenue streams that are all contributing to that record performance," he said.
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Delta is planning for a new pocket of international travel to be unlocked in China as well, and it recently announced a partnership with China Eastern Airlines for 260 codeshare flights per week. (Codeshare flights allow airlines to sell seats on flights operated by other airlines.)
"China is still not really open yet," Bastian said. "And so we've got the second-largest economy that's still not traveling. So I do think internationally we're going to continue to see strong trends there as well."
'US households want to travel'
October consumer confidence survey data from the Conference Board found a record percentage of respondents planned to travel to a foreign country in the next six months.
However, solid demand for cross-border travel may not be welcome news for a Federal Reserve trying to contain still sticky inflation.
Economists say that demand for consumer services — which includes air travel, despite the signs of normalization — is a key reason inflation remains persistent.
"The continued strong demand for consumer services is the reason why it is difficult for the Fed to get supercore inflation under control," Apollo Global chief economist Torsten Slok said in a research note. "US households want to travel on airplanes, stay at hotels, eat at restaurants, go to sporting events, amusement parks, and concerts, and that is why inflation in the non-housing service sector continues to be so high." (Disclosure: Yahoo Finance is owned by Apollo Global Management.)
Meanwhile, the wars in Ukraine and the Middle East have no resolution in sight, which is causing difficulties for businesses across industries, including air travel. Delta, United, and American have been among the airlines that have suspended service to Israel and the surrounding regions.
There may be more turbulence ahead too. CEOs surveyed as part of the KPMG 2023 CEO Outlook ranked "geopolitics and political uncertainty" as their top risk to growth over the next three years.
"Well, it's on a rolling suspension, and I don't anticipate we'll be flying, unfortunately, into Tel Aviv for quite a number of weeks, if not months," Bastian told Yahoo Finance. "You know, it's really going to be dictated by the conflict and when it's safe to return. We're ready whenever we feel comfortable and our crews are comfortable going back in."
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