Delta CEO Says Recovery Could Take Two to Three Years

Delta Air Lines CEO, Ed Bastian, told CNBC in an interview that the carrier is flying only about five percent of its usual passenger loads, with air-travel demand being nearly wiped out, due to the ongoing COVID-19 pandemic and government-imposed measures (e.g., stay-at-home orders and severe travel restrictions) put in place to slow the spread of the virus.

Reportedly, Bastian told Delta employees earlier today that he’s anticipating it will be two to three years before the company’s business recovers from the catastrophic effects of the coronavirus crisis.

“We don’t know when it will happen, but we do know that Delta will be a smaller airline for some time, and we should be prepared for a choppy, sluggish recovery even after the virus is contained,” Bastian wrote in a staff memo. “I estimate the recovery period could take two to three years. I hope it’s sooner, but we need to be realistic in our planning.”

Though 2020 started out strong for the airline industry, the escalation of the current crisis in late February and early March led to a net loss of $534 million for Delta in the first quarter—its first quarterly loss recorded in over five years.

In an earnings report released today, Bastian also speculated that second-quarter earnings would come in at 90 percent less than last year. While the airline has already instituted cost-cutting measures, including hiring freezes, grounding part of its fleet and placing thousands of employees on unpaid leave, Delta reportedly burned through $100 million per day at the end of March, but is planning to halve that rate in the second quarter of 2020.

For the quarter ending in June, Delta is reducing its total system capacity by about 85 percent, including scaling down its domestic service by 80 percent and international capacity by 90 percent, compared with last year’s volumes. It’s also parking more than 650 aircraft, consolidating airport facilities, reducing work schedules, reducing executive management’s salaries and offering its employees voluntary leave, with 37,000 taking short-term unpaid leave.

Airlines, including Delta, are slated to receive $25 billion in payroll support as part of the $2.2-trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, which should allow carriers to pay their employees through September 30, 2020. CNBC reported that Delta is anticipating about $5.4 billion in payroll aid ($3.8 billion in grants and an unsecured, ten-year, $1.6-billion loan), of which it received the first installment on April 20.

The U.S. government’s CARES Act has allocated a further $25 billion in federal loans to help air carriers survive the crisis. Delta said that it’s still considering applying and estimate that it would be eligible for about $4.6 billion. Using its existing credit facility, $1.2 billion from aircraft leasebacks and drawing on a $3-billion term loan, Delta has raised $5.4 billion on its own since the end of March.

For more information, visit delta.com.

Source: Read Full Article