Delta Trims Flying Amid Coronavirus Pandemic
July 14 2020 - 7:46AM
Dow Jones News
By Doug Cameron
Delta Air Lines Inc. trimmed plans for more summer flights amid
rising Covid-19 cases nationwide after a $5.7 billion loss for the
latest quarter underscored the depth of the crisis facing the
aviation industry.
Chief Executive Ed Bastian said that the recovery from April's
near-collapse in domestic flying had stalled, and that Delta will
halve the number of extra flights it adds in August to 500.
U.S. airlines are forecast by analysts to lose more than $23
billion this year but are adding back flights at a faster clip than
demand to protect market share. The goal is to position themselves
for a return to a pre-pandemic level of demand that is expected to
take three years or more.
"We expect this to be a very choppy recovery," Mr. Bastian said
in an interview, as Delta opened the airline reporting season with
a loss that he called a staggering illustration of the pandemic's
impact.
Delta had climbed above peers among investors in recent years by
wooing more premium travelers and securing higher fares from fliers
with improved service, making the airline particularly vulnerable
to the near collapse in business travel.
Mr. Bastian said a better picture of business travel demand
won't emerge until Labor Day, though he didn't hold out much hope
for a near-term recovery.
While Delta has pulled dozens of parked aircraft back into
service, it has sought to hold the line on pricing. Yields, or
passenger revenue divided by the number of miles flown and a proxy
for fares, rose in the June quarter from a year ago, said Mr.
Bastian.
He has been a vocal proponent of the need for government action
to cement confidence among the flying public and has called for
passenger temperature checks and masks to be mandatory. Delta also
continues to limit capacity to 60% on its flights to ensure an
empty middle seat.
His comments came as Delta on Tuesday reported a net loss of
$5.7 billion for the June quarter compared with a profit of $1.4
billion a year earlier, with sales down 88% at $1.47 billion. The
$9.01 loss per share compared with the $4.16 consensus among
analysts polled by FactSet.
The loss included $2.1 billion in charges against its stakes in
three overseas partners -- Latam Airlines Group SA, Grupo
Aeromexico SA and Virgin Atlantic Airways Ltd. -- that are all in
financial trouble. Delta also took $3.2 billion in other
pandemic-related charges, including retiring older planes.
Delta ended the quarter with $15.7 billion in liquidity after
raising almost that amount in recent months, including $5.4 billion
in government aid to pay wages. It has yet to decide whether to
take up an additional $4.6 billion federal loan.
Mr. Bastian said the pause in the demand recovery would leave it
burning $27 million in cash a day this month, in line with last
month. It is still aiming to stop losing cash by year-end, but that
goal hinges on passenger demand and the cost of shrinking the
airline when government aid runs out, which it is currently
scheduled to do on Oct. 1.
Delta has issued furlough notices to some of its unionized
pilots and is counting on thousands of staff to leave voluntarily
under a scheme that closed July 14. Mr. Bastian said 40,000 staff
had volunteered for some form of unpaid leave in July. United
Airlines Holdings Inc. last week said it may furlough almost half
its U.S. staff.
Write to Doug Cameron at doug.cameron@wsj.com
(END) Dow Jones Newswires
July 14, 2020 07:31 ET (11:31 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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