The Atlanta Journal-Constitution
Delta reports $5.4 billion quarterly loss
CEO Bastian says it could take at least two years for revenue to recover frompandemic’s damage.
Delta Air Lines booked a net loss of $ 5.4 billion in the third quarter as the company spent billions on buyouts and early retirement packages to cut its workforce and remove hundreds of airplanes from its flfleet.
About 18,000 employees took buyouts or early retirements, and CEO Ed Bastian said he expects administrative staffiffing, including at Delta’s Atlanta headquarters, to be about 25% smaller.
“Those are long- term charges that we are getting behind us,” Bastian said in an interviewwith TheAtlanta Journal- Constitution.
Themoves are expected tohelp the company reduce howmuch cash it burns over the long term after air travel plunged because of the coronaviruspandemic. The airline’s operating revenuewas $ 3 billion in the quarter, down from nearly $ 12.6 billion a year earlier.
“We do believe it could still be twoyearsormoreuntilweachieve a normalized revenue environment,” Bastian said during an investor conference call Tuesday. “Until then, we will be smaller.”
Losses narrowed slightly from the second quarter, when Delta reported a $ 5.7 billion net loss. They represent the airline’sworst quarters since 2008, when it reported a quarterly net loss of
$ 6.4 billion amid a spike in fuel prices.
In addition to staff cuts through buyouts and early retirements, another 12,000 Delta employees are still on voluntary unpaid leaves.
In an effort to persuade travelers to fly, Delta is keeping in place a policy to block middle seats and cap seating through at least Jan. 6.
“Sometime in the first half of next year, I have no doubt we will be lifting those caps,” Bastian said.
The airline has seen some recovery in travel demand to certain leisure destinations such as Florida, other beach areas and the Mountain States.
Theloss for the July- to- September quarter included $ 5.3 billion of restructuring charges including the shrinking ofheadcount and aircraft count. Atlanta- based Delta also got a $ 1.3 billion benefit from federal CARES Act stimulus funding.
Excluding those items along with a write- down of its investment in Virgin Atlantic and pension settlement charges, Delta says its adjusted pre- tax quarterly loss was $ 2.6 billion.
While job cuts so far have been through voluntary departures, there’s still a possibility of furloughs for about 1,700Delta pilots. Deltamanagement is in discussions with the pilots union to avoid the furloughs, with a deadline of the end of this month. Airlines and labor unions are pushing for another injection of federal stimulus funding to avoid job cuts.
Meanwhile, Delta has raised billions of dollars through debt financing and loans, ending September with $ 21.6 billion in liquidity, a cushion aimed at lasting through a years- long recovery. Air travel hasbeenslowly returning but is still down more than 60%, according to Transportation Security Administration figures.
Early in the pandemic, Delta was burning through $ 100 million in cash a day from operations, and has since reduced it to $ 18 million a day as of September. The airline originally set a goal of reducing it to zero by the end of the year, but Bastian said he expects Delta to still be burning through about $ 10 million of cash a day in December before getting to break even by spring.
“Most of the cash burn we have left in the business really relates to international ( flights), which is
reallywhere the major losses are still residing, given the restrictions around flying internationally,” Bastian said.
Deltaandother airlines are pushing for rapid COVID- 19 testingforinternationalflights in hopes of eliminating the need for quarantine requirements. Deltahopestoincorporate testing into the check- in and boarding process.
With just a fraction of pre- pandemic customers buying airline tickets, Delta is retiring 383 of its airplanes by the end of 2025 — about 30% of its fleet — including 200 planes this year. Bastian said the airline will also push orders for newAirbus aircraft and regional jets to later years, reducing costs to buy aircraft by $ 2 billion
this year and by more than $ 5 billion through 2022.
Delta was required to maintain service to most of the airports in its route network through Sept. 30 as part of the CARES Act funding it received.
But with that restriction now expired, Delta is also cutting more flights.
“Right now it’s a modest amount, but we are continuing to analyze the service to the small communities,” Bastian said.
Delta originally got $ 5.4billion in CARES Act funding, but received an additional $ 157 million on top of that in the third quarter, along with a $ 210 million increase in its low- interest loan from the federal stimulus.