With second-quarter revenue down more than 90 per cent year
over year, Delta Air Lines is bracing for an uneven recovery in the coming
months that largely will not include corporate travellers.
Delta reported adjusted revenue, excluding refinery sales,
of US$1.2 billion in the quarter, down 91 per cent compared with the second
quarter of 2019. Delta's capacity was down 85 per cent year over year in the
quarter.
With some capacity returning this month, Delta has seen a
"small but welcome uptick" in demand largely comprised of domestic
leisure travellers and those traveling for essential reasons, CEO Ed Bastian
said in an earnings call. Business travel, which accounts for about 50 per cent
of Delta's revenue, has "not yet returned in any meaningful way", and
the recent acceleration of Covid-19 cases in several states, quarantine
restrictions put in place in major markets including New York and Chicago and
the return of restrictions in Sun Belt states have stalled recovery. The
timeline for a return of international demand remains even more uncertain.
"We thought from the start that the recovery would be
choppy, and the past few weeks proved that would be true," Bastian said.
Revenue in the third quarter will likely be a bit stronger,
between 20 and 25 per cent of what Delta made in the third quarter of 2019,
Bastian said. That figure accounts for Delta's current capacity caps to ensure
spaced seating – a policy that differs from Delta's major competitors but that
Bastian said would likely be extended beyond its current 30 September
expiration.
Bastian projected that a "sustainable recovery"
for Delta would take two or more years. While the approximately 20 per cent of
business travel that Bastian called "unproductive" would likely not
return, he said business travel would "come back in scale".
"There's a lot of inefficiency in business travel, and
the number of trips the average road warrior takes is going to come down in
certain cases," Bastian said. "It will be trips focused on
relationship-building, interacting, reviewing performance on a global scale.
Those are going to stay. I don't think we'll ever get back entirely to where we
were in 2019 in the volume of business traffic, but the resiliency of business
traffic that we will now bake into our business model going forward will be a
better way to measure the sustainability of the recovery."
Delta reported a net loss of $2.8 billion for the quarter.
Daily cash burn for the quarter was about $43 million, but in June was $27
million per day, about 70 per cent lower than the levels seen in late March.
The carrier expects to reduce cash burn to break-even levels by the end of the
year.
Delta's operating expenses were down 53 per cent year over
year in the second quarter. That includes an 84 per cent decline in fuel costs
and a 90 per cent decline in maintenance expenses, with more than 700 aircraft
parked. Delta's second-quarter expenses from salaries and benefits were down 24
per cent year over year, due in part to more than 45,000 employees taking
voluntary unpaid leave.
Meanwhile, Delta has joined other shareholders in agreeing a rescue package for Virgin Atlantic worth £1.2 billion over the next 18 months, which will save jobs as the carrier resumes international operations from the UK.