Coronavirus: Delta CEO says air travel ‘at a stall,’ recovery two years away

Coronavirus: Delta CEO says air travel ‘at a stall,’ recovery two years away

Delta Air Lines warned on Tuesday it will be more than two years before the industry sees a sustainable recovery from the “staggering” impact of the coronavirus pandemic, with demand largely tracking the curve of infections in different places.

“We’re at a stall right now,” Chief Executive Ed Bastian told Reuters, saying demand that built up over June for travel to places like Las Vegas, Florida or New York had suffered due to fresh cases and quarantines, while picking up to some mountain and international destinations.

The Atlanta-based carrier has scaled back the flights it planned to add in August to 500 from 1,000.

Shares were down 1.9 percent pre-market.

Delta posted a $2.8 billion adjusted net loss, or $4.43 per share, for the second quarter as passenger revenue plummeted 94 percentduring a season that some analysts call the worst in aviation history.

Delta stuck to its target to halt a daily cash burn, which hit $100 million at the start of the pandemic, though Bastian warned it hinges on demand.

“There’s a lot of risk because it’s hard forecasting what’s going to happen with the virus,” he said.

The airline slowed its daily cash burn to about $27 million in June and sees a similar rate in July, with improvements as economies open and people feel more comfortable traveling.

Delta had $15.7 billion in liquidity at the end of June. It has not decided whether to take a $4.6 billion secured loan under the CARES Act – available until Sept. 30 — as it eyes other options involving similar collateral, Bastian said.

It already received $5.4 billion to cover payroll through September under the US government stimulus package.

Large US airlines have warned of furloughs in October when those funds run out, but Bastian said he hoped to avoid furloughs after more than 17,000 employees opted for buyouts and thousands more for extended unpaid leaves.

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 percent 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,” he 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, the first of the US airlines to report quarterly results, is more geared toward business travel, which will be slower to recover, but Bastian said its SkyMiles loyalty data showed business customers traveling for personal reasons and willing to pay a premium.

“This is something that will take two to three years for us to walk through and we’ll be very disciplined as to how we walk it back up,” he said.

Delta, which had been expanding aggressively through international partnerships, wrote down $1.1 billion against its recent LATAM Airlines investment and $770 million against Grupo AeroMexico after their Chapter 11 filings, and booked a $200 million charge against its stake in Virgin Atlantic, which is also restructuring.

Delta flew 93 pecent fewer passengers in the quarter, while its fuel expense was $372 million versus $2.3 billion a year ago.

Related Articles

Back to top button