It’s amazing how quickly things are changing. Just five days ago Delta Air Lines planned to cut capacity by 40% and ground 300 planes, and today they’ve shared the latest update about their future, which paints an even worse picture of the situation.
This update comes in the form of a note from Delta CEO Ed Bastian. He notes that this latest update comes as the COVID-19 pandemic progresses globally, as more people social distance, and as more government restrictions are added.
Delta reducing capacity by 70%
It’s noted that Delta’s revenue for March is expected to decline by almost $2 billion over the same month last year, with projections for April falling even more.
As a result, Delta will continue to make significant capacity reductions:
- A 70% systemwide pullback in capacity is planned, until demand starts to recover
- The biggest hit will be internationally, where we’ll see over an 80% reduction in capacity over the next three months (as a point of comparison, United has cut 95% of international capacity)
Delta is optimistic that they’ll get support from the government to remain in business, but that cash preservation remains the top priority right now.
Delta parking 600 planes, retiring planes early
Just several days ago Delta was planning on parking about 300 planes, while now Delta has announced plans to park 600 planes, which represents more than half of their fleet, and double the original plans.
The airline will also be accelerating retirement of older aircraft, including MD-88/90s, as well as 767s.
On top of that, Delta is deferring virtually all capital spending, including deferring new aircraft deliveries.
Delta asking employees to take voluntary leaves
Delta has been asking for employees to take voluntary leaves, noting it’s one of the best and most immediate ways employees can help to protect jobs and pay.
Roughly 10,000 employees have already volunteered, and the company is urging all employees to seriously consider the option of temporary leave.
Those on leave continue to have access to health and flight benefits.
A message of hope… and uncertainty
Bastian is a good guy, and makes it clear that the company will get through this, with these inspiring words:
“Make no mistake – we will get through this. This is a temporary health crisis and an end will, hopefully soon, be in sight. Never underestimate the power of travel as an essential service to our world. All of our work over the past decade to fortify our company and transform our business model will serve us well in the weeks and months ahead, as we endure and, eventually, recover.
I know everyone is concerned about the security of your jobs and pay. Given the uncertainty about the duration of this crisis, we are not yet at a point to make any decisions. And those are very painful decisions to even consider. But know that my No. 1 priority is taking the very best care of all of you.”
But there’s also a lot of uncertainty in the note, as Bastian says that “nothing is off the table” in this uncertain environment:
“In this unpredictable environment we can’t take any options off the table, but any steps that would affect your jobs or pay rates would be the absolute last thing we would do, and only if necessary to secure Delta’s long-term future.”
Bottom line
Delta is by far the best run of the “big three” US carriers, so to see Delta in such a grim situation really gives you a sense of how bad things are… not that there was any doubt.
The airline will now be reducing capacity by 70%, and grounding over 600 planes. Wow. Not surprisingly, Delta’s stock is taking a beating today…
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