Delta posts $5.4B loss due to pandemic
The summer travel season was even worse than expected for Delta Air Lines as people hunkered down.
The summer travel season was even worse than expected for Delta Air Lines, which said Tuesday that it lost $5.4 billion in the third quarter as people hunkered down at home during the pandemic.
Delta officials pushed back their timetable for breaking even, from year-end to next spring, as their previous expectation that COVID-19 would be contained proved too rosy.
However, executives said passengers are starting to return and bookings for Thanksgiving and Christmas are looking up.
“It’s slow, but it’s steady — week by week, they are coming back,” CEO Ed Bastian said of passengers.
Bastian said Delta plans to stop blocking middle seats in the first half of next year. That would reverse a policy that Delta has used to distinguish itself during the pandemic from its closest peers, AmericanAirlines andUnited Airlines, who do not block seats.
Thenumberof people screened at U.S. airports is down 65% this month, compared with last October, but that’s better than the 68% decline in September, the 71% drop in August and the 96% plunge in mid-April.
Bastian said a widely available vaccine, rapid COVID testing and the lifting of traveler quarantines are needed before corporate travel recovers.
Delta’s loss compared with a year-ago profit of $1.5 billion and nearly matched the loss of $5.7 billion in the second quarter, when the pandemic brought air travel to a near standstill. Since then, Delta has concentrated on hoarding cash — it raised $9 billion by mortgaging its frequent-flyer program — and cutting costs.
Delta reduced its cash-burn rate to $18.4million a day in September from$26.1million in July and August, and Bastian predicted it could reach break-even cashflowby spring. Investors are watching cashas a gauge for how long carriers can last in the industry’s current depressed state.
Cowen airline analyst Helane Becker said she was not surprised that Delta said it would take more time than expected to hit break-even. “Air travel demand has been improving, but the pace of the recovery has been slower thanwhat the market wants to hear.”
The slower cash burn comes with a human price: It is possible in part because 18,000 employees took buyouts or early retirement and thousands more have taken unpaid leave. Executives said 40,000 took leave during the summer; 12,000were on leave in September. Delta had 91,000 employees in January.
The large number of voluntary departures has let Delta avoid layoffs, in sharp contrast to American, which furloughed 19,000 employees this month, and United, which cut 13,000.
Delta could still furlough 1,700 pilots next month unless the union agrees to contract concessions or Congress and the White House provide more aid for the airline industry.