Coronavirus costs Delta Air Lines nearly $6 billion in 2nd Quarter

As passenger demand slumped because of the coronavirus pandemic, Delta parked dozens of unneeded jets at the Birmingham-Shuttlesworth International Airport in Alabama in May.

Over the last three months, Delta Air Lines lost nearly $6 billion as the company’s CEO said a slow, brief recovery in air travel has now stalled amid a big resurgence in coronavirus infections.

Delta is the first U.S. airline to report second-quarter financial results; it is the first full quarter since the pandemic began, and the results are worse than anticipated.

Delta flew 93% percent fewer passengers in April, May and June than it did in the second quarter last year. Revenue fell 91% compared with the same three-month period last year as the airline said it was losing close to $100 million a day at the start of the pandemic. Atlanta-based Delta said it is still burning about $27 million a day.

Delta CEO Ed Bastian called the losses “staggering,” adding that “it could be two years or more before we see a sustainable recovery.”

Bastian noted that in June and early July, there was “a small but welcome uptick in passenger volume, driven almost entirely by domestic leisure travelers and those flying for essential reasons.”

But he said that uptick was short-lived.

“We’ve seen demand growth flatten recently with a rise in COVID-19 cases,” he said.

As a result, Delta is scaling back its plan to add flights in August, cutting the number from 1,000 additional daily departures down to 500.

“The recovery will be choppy waves,” Bastian said in a conference call with analysts and reporters Tuesday. He noted that business travel, which typically provides the airline with half of its revenue, “has not yet returned in any meaningful way.”

And Bastian added that there isn’t a clear timeline for when international borders will open for U.S. travelers.

To succeed amid all the uncertainty, Bastian said the airline will focus on “building resilience throughout the company and creating a new, stronger Delta, albeit one that will need to be smaller for the next several years.”

Business travel in particular is not expected to recover for at least 12 to 18 months. Bastian suggested many companies may wait until there is a COVID-19 vaccine before allowing employees to travel again, and when they do, he acknowledged video chats and Zoom meetings may replace some face-to-face interactions.

“The number of trips that the average road warrior takes I’m sure is going to come down in certain cases,” Bastian said.

While some of Delta’s competitors are warning of mass job cuts after federal payroll funding runs out September 30, including United Airlines, Bastian said he is hoping to avoid layoffs and involuntary furloughs. Delta said 17,000 of its 91,000 employees have taken early retirement or other incentives to leave the airline, while another 35,000 are taking short-term unpaid leaves.

Some competitors, including United, American Airlines and Spirit Airlines, are fully booking planes and filling every seat if there is enough demand, but Bastian said that “is not what Delta is going to do.”

He said his airline will continue to block out middle seats and limit the number of people on each flight to 60% of the plane’s capacity at least through the end of September and likely beyond.

“Customers aren’t pushing us to do it,” Bastian said. “And I’d rather add more flights back and more seats into the market in a safe way than trying to maximize the number of people you can put on an individual airplane.”

He added, “When we survey customers today about reasons you’re purchasing a ticket on Delta, the space on board the plane (and) the blocked middle seats has gone to the No. 1 reason why customers are choosing Delta.”

“In the face of a health crisis, that space on board really matters,” Bastian said.

Delta’s net loss for the second quarter was $5.7 billion. That includes $2 billion in write-downs from the company’s investments in Latam Airlines, the biggest carrier in Latin America, as well as Aeromexico and Virgin Atlantic. All three have faced financial difficulties.

In the second quarter last year, Delta made a profit of nearly $1.5 billion.

Most other U.S. airlines will report their second-quarter financial results next week.

Source: NPR


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