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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