‘Growth has stalled’: Surge in US infections hits Delta

Delta Air Lines lost $5.7 billion during a brutal threemonth stretch in which the coronavirus pandemic brought travel to a near standstill, and any hoped-for recovery has been smothered by a resurgence of infected Americans.

“Growth has stalled,” Delta CEO Ed Bastian said. “It was growing at a pretty nice clip through June. The virus, unfortunately, was also growing.”

Bastian said it will take more than two years for the airline to make “sustainable” recovery.

Delta is the first U.S. airline to report financial results for the May-through-june quarter, and the numbers were ugly.

Passengers boarding Delta planes tumbled 93% from a year earlier, revenue plummeted 88%, and the company’s losses were worse than anticipated.

Airlines are expected to furlough thousands of workers when federal aid to help cover payroll expenses runs out on Oct 1. Bastian held out hope that Delta might avoid those cuts because 17,000 of its 91,000 employees have accepted early retirement. Another 35,000 are taking unpaid leave in July.

The most important financial measure in the airline business right now is cash burn, which determines how long carriers can keep flying while travel remains severely depressed.

Delta has about 19 months worth of cash and short-term investments at its current burn rate of $27 million a day. Back in March, Delta was blazing through nearly $100 million a day.

What’s missing now are enough passengers willing to buy a ticket.

“There is a lot of it that is out of our control,” Bastian said in an interview.

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 COVID-19 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.