Delta Cuts Capacity By 70%, Grounds 600 Planes

Filed Under: Delta

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…

Comments
  1. Is this Delta mainline? Or, does it include Connection carriers? If it’s Delta mainline, 600 airplanes is far more than half their fleet.

    I would expect AA and UA to make similar upcoming drastic announcements.

  2. I can tell you right now Ed Bastian , Oscar Munoz , and Doug Parker’s compensation packages better be thrown under a microscope after any bailout. Unacceptable!

  3. @Sharon : sure if it makes you feel better. i already said it yesterday on crankyflier’s forum ( i use the same screename you can find it) but i’ll repeat it once here :

    every single airline not re-nationalized will have to visit either Chp 11 or Chp 7. every country. every market segment. regardless of what their balance sheet looked like back on 12/31.From Alaska to Allegiant. From LATAM to Lion Air.

    no. exceptions.

  4. As someone who works in the airline I am very torn. Unfortunately there will be no option but to bail out. Its good for my job but read an article on cnbc how Delta didn’t even have a months worth of cash on hand. Not just Delta but all those years of making billions and billions and businesses did stock buy backs rather than put money away. Wall St blames Americans for not having 6 months emergency fund but have no problem seeking bail outs. Airlines already receive billions in tax breaks and subsidies from local, state, and federal governments so they arent really private business. The government has always provided aide to them because they are critical infrastructure. They are private businesses that are only able to make money due to government support as it is. Then the billions in profts went to stock holders instead of back to municipalities that cut the taxes and provided financial incentives to airlines. When this is all over airlines will probably be quasi-state owned for a while to prevent this madness happening again. Due to extensive rails owned by governments in Europe, they can focus more on saving international airlines. We have no realistic rail system here in the states and will be forced to bailout the airlines bc they are too critical for domestic infrastructure.

  5. Every airline stock is taking a beating today… DAL’s loss is not indicative of the announcement. UAL -33%, AAL -28% as I post this.

  6. Pierce the corporate veil and take every penny from the executives, board members, and their families. Leave them in poverty! They deserve it.

  7. You mention retiring MD-88/90s……wow, did not know these old timers were still in use by a major carrier… And for those on leave, ‘flight benefits’ are still in place…wow, what a valuable perk in times where hardly anybody flies any longer…..

  8. Lucky finally realizing that AA, the carrier with the “worst management” had the best liquidity of all the airlines. Remember, it’s not about how much debt you have- its about liquidity and when you have to pay it.

  9. The only airlines should be bailed is American, Alaska, and Hawaiian the others should merge.

  10. Boeing is the one really hurting. At 400 a couple months ago. Down to 93 and falling.

    Unemployment claims are going up across the country by the 100s of thousands.

  11. @Tom:
    Something not mentioned here is that all the C level execs are taking a 50% pay cut for the duration and Ed is taking a 100% pay cut. Board members are taking a 25% pay cut.

  12. I wonder if Delta can get that $2,000,000,000 back that they put into Latam. All Latam airlines will go bust. Delta can kiss that money goodbye! Plus all the money put into AF/KL, AM, KE & MU that money will be lost too.

  13. @Neh: Pretty sure Korean Airlines is still a solid investment. Korea is going to emerge from this crisis faster than almost any other country. I’m guessing they could have full or nearly full flight schedule to Singapore, China, Taiwan, Hong Kong, and Japan quite soon.

  14. @Bob Marley slight correction – directors/managing directors are taking a 25% pay cut (these are management employees), not the Board of Directors. The BoD is forgoing their compensation just like Ed.

  15. jedipenguin says:
    March 18, 2020 at 3:00 pm
    The only airlines should be bailed is American, Alaska, and Hawaiian the others should merge.

    jedipenguin says:
    March 18, 2022 at 3:00 pm
    How come the only airline that flies from NYC to DFW is AA and the fare is $2,000 in a middle seat in economy and the service is terrible?

  16. ““I don’t think we’re ever going to lose money again,” Parker said. “We have an industry that’s going to be profitable in good and bad times.”

    Doug Parker, AA CEO, Sept 28, 2017

    This quote didn’t incubate well.

  17. Some employees got promoted to “red coats” and some I believe in “task assigning” positions at lax which means they get paid more. How is this helping? If you’re reducing 70 percent capacity, how do you even justify paying employees more or promoting? Do you honestly need more red coats to supervise empty airport lobbies? Or more “task assigning” to assign employees to empty flights? Just wow!

  18. @Daniel DePaolo : emerging faster than others doesn’t mean commerce will resume. cuz you still need other participants to conduct trade.

    the compactness of Korea ensures no meaningful domestic market other than to Jeju Island. Anyone who isn’t thinking along the lines of Great Depression and Dust Bowls is only doing themselves a disservice.

    Ebola 2014 pandemic spanned 2 years 7 months , 28646 cases, 11k deaths. In last 24 hours alone, the world is cranking out new cases at a rate that matches one full ebola pandemic worth of cases every 36 hours. So please keep stop kidding yourself this thing will blow away quickly with these too little too late measurements like “social distancing”.

    “Flattening the curve” is basically back-loading the cases. But since everyone will experience panic regardless of whether you contract it or not, for one’s own mental well being, it’s better to front load the panic part. The epidemiologists aren’t panicking this moment because they’ve front loaded the panic part of one’s emotions way back in late Jan, and once you’ve cycled through that phase of your emotions, you’ll re-emerge with a clearer mind to focus on the rest of life’s problems.

    Forget about whether US will be a Korea or Italy. At this point the best case scenario for US will be “only a France”.

  19. I’m curious; if Delta is going to use this time to get rid of those terrible MDs but not take delivery of any new aircraft, it would seem to me that Delta does not plan on a quick ramp up following this mess. Thoughts anyone? Thanks

  20. I don’t think it’s that they didn’t have a month‘a of cash on hand. It’s the fact that airlines aren’t cheap to operate and refunding 10x (or more) the normal rate. There’s a lot of cash being refunded in the airline industry right now.

  21. Korean Air is going bankrupt probably. The gov’t will bail them out but probably force them to merge with Asiana which throws their stake into doubt. Delta is seriously screwed. Latam is plummeting and they’ve invested billions and don’t even have anything to show for it yet, stake in KLM/Air France is lost money and European aviation is more of a mess than ours, they are not union FAs so thousands of jobs will be easily gotten rid of and cripple their ability to rebound and compete (furloughs at American and United can easily be called back and have experienced employees put back in the system quickly – Delta has zero policy regarding furlough or being called back or any protection) – as much as I bash American I cannot believen Delta has less than a months worth of cash on hand. American has maybe 1-2 months which isn’t great but wow. Aviation will never be the same no matter what type of bailout happens.

  22. @henry LAX

    I don’t know why are you comparing this to Ebola. This is more contagious than Ebola.
    Ebola was an epidemic not pandemic. It has much higher fatality but doesn’t spread from patients without symptoms. So it feels a lot more scary but much easier to prevent spreads. “social distancing” is not little too late but way too late (and still ineffective without common sense). The world should have gotten the memo when Wuhan was quarantined but planes were flying freely.

    “Flattening the curve” is a novel idea.
    But works just like toilet paper. Y’all can flat all you want, but I need assurance that I can wipe my @.. for the next 18 months. So y’all can kiss my @…, it’s clean.

  23. Gotta agree with HenryLAX. We are going into a depression, things will not be the same this time next year. Millions of people are losing their jobs right now, lots of them are from small business that won’t be coming back.

    Half this country can not scrape together $800 or less for an emergency, they live pay check to pay check. The party is over and the hangover is gonna be a mutherfucker.

  24. All the hate for airline executives and shareholders when they did not cause a pandemic is repugnant. They did not have a severe downturn because of any of their decisions in a free market but because governments around the world literally banned them from flying to many locations and state and local governments have ordered hotels, restaurants, venues, bars, beaches and factories shut. That is the definition of not a free market. No matter how much cash airlines had on hand all in the world will need some support. For all the crap Boeing gets even Airbus said it may need government assistance in 2 months on top of their regular subsidies.

    If the assistance is in the form of loan guarantees and no interest loans then that is not a bailout.

  25. @Christina Bator

    Most of the scheduling changes for next month is complete. Just keep an eye on the My Trips page on Delta’s website, it will indicate any change that occurs in a bright red box. A good indicator of a flight being cancelled is tickets for your flight being listed as “sold out” in the booking screen. Usually a full flight is simply hidden from view.

  26. @christina

    You are thinking of flying?

    Are you totally unaware of the situation? People who are flying are spreading the virus. This is a pandemic.

    Don’t fly. Period

  27. Are you guys aware that Delta is only giving refunds if your flight was canceled? Otherwise it’s a voucher. However, contrary to ALL published reports of them parking planes and canceling flights, their website says “sold out” rather than “cancelled” on flights so that they don’t have to refund you. This is unconscionable and there should be something done about it. The airlines are going to get a government bailout so they will be fine. They will then turn around and stick it to the public when this mess is over. I hope they all go bankrupt. Ben, you need to put something about this on your blog unless you’re afraid of getting barred from their airplanes.

  28. These workers are actually better off to be laid off so that then they can obtain unemployment coverage! The only reason the airline is asking people to take early outs is so that it doesn’t have to pay unemployment insurance! DON’T DO IT!!!

  29. So if the airline cancels the flight and does not want to refund us, what is our recourse?
    Can we dispute the charge with our credit card company?
    I understand it might not be their fault, but they also shouldn’t keep the money for a service that was not offered. Wouldn’t the 2-hour schedule change rule apply here?

  30. Airports might make good temporary hospitals for COVID-19 victims when the regular hospitals fill up. They are isolated from the general population and equipped with modern sanitation facilities. Obviously you leave a terminal open for airline business, but use the others for patient needs. Same with hotels, schools, malls, many places that are now closed or closing soon.

  31. The point is they are not canceling flights. They are showing them as sold out on their website to avoid refunding people’s money. I have put in claims with credit card companies and they should not be only issuing vouchers in this situation. They should be giving us a choice in how we want a refund. I have no pity for them and their situation as they will gouge us again the first chance they get.

Leave a Reply

If you'd like to participate in the discussion, please adhere to our commenting guidelines. Your email address will not be published. Required fields are marked *