Delta’s loss $5.7B in 2Q; cuts ahead
ATLANTA — Delta Air Lines had a $5.7 billion net loss for the second quarter and is cutting its workforce through buyouts and early retirements.
More than 17,000 employees have accepted early retirement or buyouts. Another 35,000 are taking unpaid leave in July.
That’s about 20% of the company’s workforce. The voluntary departures are expected to help reduce the need for involuntary furloughs or layoffs.
“I’m optimistic if we do have a furlough, it’s going to be relatively small numbers,” Delta chief executive Ed Bastian said Tuesday on CNBC .
The quarterly loss reflects “the truly staggering impact” of the coronavirus pandemic, Bastian said in a written statement. “We continue to believe that it will be more
than two years before we see a sustainable recovery,” he added.
Atlanta-based Delta cut its flying by 85% in the quarter that ended June 30, but its passenger counts declined even more, down 93%.
Now, “with the virus spreading in the South, it’s put a pause on demand growth,” Bastian said.
Delta has slashed plans to restore some service, adding back no more than 500 flights in August instead of the 1,000 it had planned. It doesn’t see adding much more through the end of the year.
The airline announced Tuesday plans to retire its Boeing 737-700 fleet, a smaller plane type that Bastian said is not as economical. That’s part of more than 100 planes Delta is retiring for good from its fleet of more than 1,000 aircraft. It has already retired all of its MD-88s and MD-90s and plans to retire its entire Boeing 777 wide-body
aircraft fleet and some of its Airbus A320s and Boeing 767300ERs.
A year ago, Delta as one of the world’s largest airlines had second-quarter operating revenue of $12.5 billion. That declined 88% to $1.5 billion in the most recent quarter.
The company managed to cut back its second-quarter operating expenses to $6.3 billion from $10.4 billion a year ago by parking planes, asking workers to take unpaid leave, cutting hours and pay and reducing other expenses.
To cut its staff, the airline has been offering buyouts and early retirements. Delta and other airlines have said if they cannot cut their staffs enough through voluntary measures, they would resort to layoffs.
The airline had additional charges for airplane retirements,
write-downs of its investments in struggling airline partners including LATAM and Aeromexico, which filed for bankruptcy protection, as well as Virgin Atlantic. Adjusted for those factors and others, it said its quarterly adjusted pretax loss amounted to $3.9 billion.
Delta has benefited from government rescue funding for airlines, getting $5.4 billion of grants and unsecured loans through the Coronavirus, Aid, Relief, and Economic Security Act.
It also has raised billions in other loan financing for a cash position of $15.7 billion at the end of June. The company in June burned through an average of $27 million a day in cash, but expects to reach the break-even point by the end of the year. Even without improvements in the business, Bastian said the amount of cash the company has built up should last for 19 months.
“I think our cash position has certainly stabilized,” he said.
Air travel within the United States fell 95% from the start of
March until mid-April, when fewer than 100,000 people boarded airline planes on some days, down from more than 2 million a day a year earlier. That rose to more than 700,000 on the best days, but it has hit a plateau in July, coinciding with increased coronavirus cases across the Sun Belt.
Delta, along with Southwest and JetBlue, has limited capacity to about 60% on domestic flights. United and American don’t block seats.
Airline customers have historically put a priority on fare prices, but Bastian thinks that could be changing. Customers are telling the airline they are uncomfortable boarding packed planes, and fully booking flights “is not what Delta is going to do,” he said.
Delta has promised to cap seating through Sept. 30.
The company’s shares fell 2.65% to close at $26.11 Tuesday.