Delta loves its blocked middle seats, and it has repeatedly said that this is a strategy that’s working for the airline. The US Department of Transportation (DOT) recently released Q3 2020 numbers, and well, they say otherwise. Admittedly, Q3 was a long time ago in a pandemic world, but the numbers are pretty clear here. If we’re looking at generating revenue, Delta fell behind, United surged ahead, and American was forced to buy traffic to keep pace. I dug in to Cirium‘s data to show you exactly what’s going on.
Listening in to Delta’s recent Q4 earnings call, you might think it had found that the real key to success in this industry is selling fewer seats on airplanes. As President Glen Hauenstein put it,
And despite having meaningfully less inventory per sale given our middle seat block, we outperformed on passenger revenue generation in the first nine months of the year. This is a testament to customers’ willingness to pay a premium for the Delta difference.
Outperformend on passenger revenue generation? What does that mean? Glen said this in response to a question by Ted Reed on the call:
Our revenue premiums have never been higher. And so, customers are valuing the Delta difference. And I think that’s how we’re looking at that is when you look at our revenue production versus our competitive set, despite having the least amount of salable capacity, our revenues have kept pace.
Really? What I see is that Delta has constricted supply so much that it’s able to squeeze out higher fares. Let’s start by looking at capacity.
Q3 Year-Over-Year Domestic Departures and Seats by Airline

In July through September, Delta operated roughly the same percent of domestic seats year-over-year as American, but just look how few seats Delta had for sale compared to the previous year. In other words, Delta had a good number of flights available but not a lot of seats to sell on them. That sounds like a recipe for being able to keep fares higher, and that is indeed what Delta did.
Here are the domestic stage-length adjusted yields over time. Yield, as a quick refresher for those who need it, is expressed as cents per mile and totals up the fares collected and divides that number by the number of miles each person flew on the airline (also known as Revenue Passenger Miles, or RPMs). Then Cirium adjusts that data to make sure it’s all assuming a standard 1,000 mile stage length so we can compare apples to apples between airlines. (Shorter average stage lengths tend to have higher yields as a rule, so it would skew otherwise.)
Stage-Length Adjusted Yield by Quarter (in cents)

Sure enough, by the time we got into the third quarter, Delta had been able to significantly increase its yield premium. This isn’t a surprise, but it’s also not useful unless you’re in a vacuum. I mean, you could sell one seat for $10,000 and your yields would be through the roof, but that’s a lot worse than selling 20 seats for $1,000. Sure, yield is down, but you make more money.
So, next we can look at the load factor, which takes those RPMs and divides by the number of miles every seat flew, whether occupied or not. That’s Available Seat Miles, or ASMs.
Load Factor by Quarter (percentages)

Naturally, nobody is happy with these kind of load factors, but United and American are far ahead of Delta just because of how many more seats they were willing to actually sell. Delta automatically said it wouldn’t sell roughly 40 percent of the seats onboard, so that ties the airline’s hands behind its back before it even starts.
When we combine the yield with the load factor, we get the real answer that matters. We have the total passenger revenue divided by ASMs (PRASM) to figure out just how much revenue is being generated per mile regardless of how many seats are full.
Stage-Length Adjusted PRASM by Quarter (in cents)

That is a very significant difference in PRASM. Put it this way, let’s say each airline flew a 150-seat airplane 1,000 miles. United would have generated $8,700. American would have generated $8,550. Delta would have collected only $7,350. Remember, none of this is covering costs during the pandemic. These numbers are terrible, but that’s still a lot more money in the pockets of American and United for every flight that operates.
A slight tangent from the main thesis here… it’s also notable that American and United came to that point through very different strategies. You’ll remember that in the early summer, American zoomed ahead with capacity and tried to make a play for a surge in demand that didn’t develop. With that capacity out there, American decided to fill up as much as it could by taking rock bottom fares. If you’d looked at these strategies, you’d probably choose United’s.
How Can Delta Stand Behind This?
With all this data, how is it that Delta can say this strategy is working? First, I have to note that this is only for the third quarter of 2020. Who knows, maybe a magical fairy waved a wand and in the fourth quarter things were completely different. We’ll find out when the data is released.
Ultimately, Delta’s strategy seems to be one that tries to get customers who are willing to pay more on a Delta airplane now. Then the hope is that they will somehow keep paying more in the future even after the middle seat block is gone. Then… PROFIT! That’s a big bet, and it’s not one I’d be willing to make.