Delta Curbs Plan to Add Flights As It Records a $5.7 Billion Loss -- WSJ
July 15 2020 - 3:02AM
Dow Jones News
By Doug Cameron
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 15, 2020).
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. Delta will halve the
number of extra flights it adds in August to 500, and capacity in
the September quarter is expected to be at best 25% of the level a
year ago.
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.
Mr. Bastian said on an investor call Tuesday that he didn't
expect the level of business flying to ever recover to its
pre-pandemic level as companies refocus on essential travel.
Analysts estimate premium fliers account for an industry-leading
half of sales at Delta.
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.
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 4% in the June quarter from a year ago.
Mr. Bastian 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.
Adjusted for one-off charges, Delta lost $2.8 billion. The $4.43
loss per share compared with the $4.16 consensus among analysts
polled by FactSet.
Delta's shares were down 2.7% at $26.09 in early afternoon
trading.
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., with the latter
securing a new financing package on Tuesday.
Delta ended the quarter with $15.7 billion in liquidity, which
it said was enough to sustain operations for 19 months. This
includes $5.4 billion in government aid to pay wages. The company
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
Delta 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 program that closed July 14. Mr. Bastian said he hoped this
would minimize or eliminate the need for involuntary layoffs, with
40,000 staff also taking 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 15, 2020 02:47 ET (06:47 GMT)
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