Delta Is Soaking up ‘Spillover Demand’ From 737 MAX Operators

Delta Air Lines is benefitting from the grounding of the Boeing 737 MAX, picking up unmet demand at competitors by accelerating its own growth, says one Wall Street analyst.

The Atlanta-based carrier is growing capacity faster than its 3% target for the year due to a "uptick in demand as a result of the grounding of the 737 MAX," says Cowen analyst Helane Becker in a report today.

"Delta is benefiting from artificially low capacity growth and spillover demand from competitors impacted by the grounding of the MAX," she says.

The airline grew capacity by 4.3% year-over-year in the first half, and is expected to grow another 3.9% in the second half – numbers that could put its annual increase above 4% – according to Diio by Cirium schedules data.

MAX operators American Airlines, Southwest Airlines and United Airlines have all dialed back 2019 growth plans due to the grounding of Boeing's troubled aircraft. American has cut its expected capacity increase by half a point, to about 2.5%. Southwest has trimmed its capacity growth by up to two points to 2-3%, and United by a full point to 4-5%.

Related: Delta Air Lines Says Boston Is Now One of Its Hub Cities

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American and Southwest have both temporarily suspended routes due to the grounding. These moves are in addition to the thousands of flights already removed from their schedules as they grapple with the ground of the MAX.

Southwest has removed the 737 MAX from its schedules through Oct. 1, but executives have said they will likely be extended. American and United have both removed the aircraft from schedules through early September.

Regulators have yet to say when they expect the 737 MAX to return to the skies. European officials have reportedly found issues with the aircraft's autopilot system, potentially adding to the list of items Boeing must correct before the MAX is re-certified.

Related: Delta Adds New Florida Route From Growing Raleigh/Durham 'Focus City'

Delta continues to take delivery of new Airbus and Boeing aircraft, including the new Airbus A220 and its last Boeing 737-900ER. The airline had nine A220s on property at the end of March, a type that it is using to expand at some of its coastal hubs and focus cities.

Delta declined to comment on the Cowen report.