Delta Air Lines recorded a significantly lower profit in the second quarter as airlines face a new challenge during the busy summer travel season: There are too many flights.

As the Covid-19 pandemic waned, airlines scrambled to meet the seemingly insatiable demand for travel by purchasing airplanes, hiring staff, and expanding flight schedules. Although passenger traffic in the U.S. is setting records, supply is outstripping demand as airlines deploy larger aircraft with more seats.

Currently, there is an oversupply of airplane seats, especially in the lower market segment, and airlines are cutting domestic fares to fill them, said Delta CEO Ed Bastian in an interview. Bastian expects the profitability of the domestic market to improve in the coming months as airlines scale back their fall flight schedules.

We are already seeing that the industry is taking significant corrective measures by reducing capacities," Bastian said. "And we expect to restore balance by the end of August.

Delta is the first airline to release second-quarter results just days after the number of daily travelers at US airport security checkpoints surpassed three million for the first time. Nevertheless, airlines are facing challenging business conditions during their peak season.

Delta's profit in the last quarter amounted to $1.31 billion, which represents a decline of 29% compared to the previous year. The adjusted profit was $2.36 per share, slightly below the expectations of analysts surveyed by FactSet.

Revenue, excluding sales from Delta's refinery, rose by 5.4% to a record $15.4 billion.

Delta's shares fell by about 6% on Thursday, as the earnings outlook for the third quarter also fell short of Wall Street's expectations. Other US airlines also recorded losses in morning trading.

Analysts expect Delta to outperform competitors as the company focuses on lucrative international routes and premium seats. American Airlines and Southwest Airlines have lowered their forecasts for the June quarter. Airlines that focus on cheaper flights are struggling and adjusting their business models to attract passengers.

Lower airfares were reflected in the inflation data released on Thursday. The airfare index of the consumer price index fell by 5.1% in June compared to the previous year.

Delta's strategy of focusing on high-quality offerings has paid off, as customers are more willing to pay for amenities such as lounge access and comfortable seating.

More than half of Delta's revenue now comes from sources such as the loyalty program and the sale of premium tickets. The sale of premium tickets also grew faster than in the main cabin of the airline.

Southwest considers adding seats with more legroom as airlines expand their premium options.

There is plenty of room for others to follow our example," said Bastian.

Nevertheless, Delta was not immune to the domestic airline price race, as competitors had to adjust their falling prices to attract passengers. Although total domestic revenues increased, Delta earns less money per seat per mile flown, indicating weakening pricing power. The planes were also slightly less filled than the previous year.

While Delta said that the demand for transatlantic travel remains strong, Bastian expects the Summer Olympics in Paris to reduce revenues by $100 million between June and August. However, the impact of the games, according to Bastian, would be only temporary.

Unless you go to the Olympic Games, there are no businesses going there, there are not many others going there," said Bastian.