Delta CEO says air travel ‘at a stall’ amid resurgent Covid-19, recovery over two years away

Ed Bastian, CEO of Delta Airlines at the 2016 International Air Transport Association (IATA) Annual General Meeting (AGM) and World Air Transport Summit in Dublin June 2, 2016. — Reuters pic
Ed Bastian, CEO of Delta Airlines at the 2016 International Air Transport Association (IATA) Annual General Meeting (AGM) and World Air Transport Summit in Dublin June 2, 2016. — Reuters pic

CHICAGO, July 14 — Delta Air Lines warned today 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,” CEO 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.

“We haven’t gone backwards,” he said. But “we’re not growing,” he added.

Atlanta-based Delta posted a US$2.8 billion (RM11.9 billion) adjusted net loss, or US$4.43 per share, for the second quarter ended June 30 as passenger revenues plummeted 94 per cent during a season that some analysts call the worst in aviation history.

Delta stuck to its target to halt a daily cash burn, which hit US$100 million at the start of the pandemic, by the end of the year, 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 US$27 million in June and sees a similar rate in July, with improvements as economies open and people feel more comfortable traveling.

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

It already received US$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 15,000 employees opted for buyouts and thousands more for extended unpaid 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 per cent of the plane.

“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 US$1.1 billion against its recent LATAM Airlines investment and US$770 million against Grupo AeroMexico after their Chapter 11 filings, and booked a US$200 million charge against its stake in Virgin Atlantic, which is also restructuring.

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

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