CHICAGO: Delta Air Lines expects its third-quarter revenue and flight capacity to be around 20% to 25% of last summer, with demand stalling amid a surge in Covid-19 cases and a sustainable industry recovery more than two years away.
“We’re at a stall right now,” chief executive Ed Bastian said on Tuesday.
Leisure demand that built up over June for travel to places like Las Vegas, Florida or New York has suffered due to fresh infections and quarantines, while growing to some mountain and international destinations.
Business demand will lag by 12 to 18 months as companies await a Covid-19 vaccine before feeling they can safely put employees back on the road, Bastian said, noting the realisation that video calls can sometimes be more efficient.
That doesn’t mean business travel will disappear, but 2019 volumes may not return at scale.
“The number of trips that the average road warrior takes I’m sure is going to come down in certain cases,” he told analysts.
Delta cut the flights it planned to add in August to 500 from 1,000 as outbreaks accelerate.
The pandemic has forced airlines globally to park planes, cut costs and raise capital to stem losses.
Atlanta-based Delta stuck to its target to halt a daily cash burn, which hit US$100 mil at the start of the crisis but slowed to US$27 mil in June, this year though Bastian warned it will hinge on demand, which remains choppy and uncertain.
It sees the July burn rate steady at US$27 mil a day, with improvements as people feel more comfortable travelling.
Delta, the first US airline to report quarterly results, posted a US$2.8 bil adjusted net loss, or US$4.43 per share, for the second quarter as passenger revenue plummeted 94% during a season that some analysts call the worst in aviation history.
It had US$15.7 bil in liquidity at the end of June and has not decided whether to take a US$4.6 bil secured loan under the CARES Act as it eyes other financing involving similar collateral.
It already received US$5.4 bil in taxpayer funds to cover payroll through September.
Large US airlines have warned of furloughs in October when the stimulus runs out, but Bastian said he hoped to avoid furloughs after more than 17,000 employees opted for buyouts.
Over 45,000 employees have taken varying short-term leaves.
Limited seating
Delta may continue blocking middle seats beyond September thanks to demand for comfort but warned it cannot make money filling only 60% of its planes.
“You can’t raise prices high enough, particularly when your competition isn’t blocking middle seats and has a lot more supply out there,” Bastian said.
Southwest Airlines too is limiting seating capacity through September, but rivals American Airlines and United Airlines have added thousands of flights with all seats for sale on hopes of picking up leisure summer demand.
Delta is more geared toward business travel, but Bastian said its SkyMiles loyalty data showed business customers traveling for personal reasons and willing to pay a premium.
Delta, which had been expanding aggressively through international partnerships, wrote down US$1.1 bil against its recent LATAM Airlines investment and US$770 mil against Grupo AeroMexico after their Chapter 11 filings.
It also booked a US$200 mil charge against its stake in British airline Virgin Atlantic, which on Tuesday agreed to a private-only rescue deal. – July 15, 2020, Reuters
