Delta Grounds 300 Planes, Cuts 40% Of Flights, Asks Government For Help

Filed Under: Delta

Update: Delta now has plans to reduce capacity by 70% and ground 600 planes.

Delta’s CEO, Ed Bastian, has just sent a letter to employees outlining the drastic measures the company will be taking in the days and months ahead. To start, Bastian won’t take his salary for the next six months.

More materially, expect Delta to ground planes, cancel flights, and even ask the government for aid (which the hotel industry is asking for as well).

Drop in demand unlike anything Delta has seen before

The company says that they’ve seen demand for travel declining at an accelerated pace daily, driving an unprecedented revenue impact. The airline is experiencing negative net bookings for the next four weeks (in other words, they’re seeing more cancelations than new bookings).

Just to give you a sense of how dire they’re making the situation sound, here’s part of the note:

“The speed of the demand fall-off is unlike anything we’ve seen – and we’ve seen a lot in our business. We are moving quickly to preserve cash and protect our company. And with revenues dropping, we must be focused on taking costs out of our business.”

Delta grounding planes, reducing fleet, and more

Delta has outlined the extreme action they’ll be taking to respond:

  • Delta is reducing their overall capacity by 40% over the next few months, which is the largest capacity cut in the company’s history, including 2001
  • Delta is eliminating flying to continental Europe for the next 30 days, which could be extended; service to London will be maintained
  • Delta is parking up to 300 aircraft as they require a substantially smaller fleet due to reduced flying
  • Delta is deferring new aircraft deliveries to preserve cash
  • Delta is reducing capital expenditures by at least $2 billion for 2020, including delaying aircraft modifications, IT initiatives, and other opportunities to preserve cash
  • Delta is offering voluntary short-term, unpaid leave
  • Delta is implementing immediate hiring freezes
  • Delta is substantially reducing use of consultants and contractors

Which aircraft could Delta ground?

What’s interesting about Delta is that historically they’ve flown older planes but have just maintained them well, realizing that’s money better spent than buying new planes.

Presumably Delta needs to ground both long haul and short haul aircraft, given there’s a decrease in demand across the board. What I’m curious about is if Delta truly plans on grounding planes with a short term intent, or if they’ll use this opportunity to retire any planes early, as American has.

Delta has a fleet of around 75 MD-80/90s and about 75 767s. If they don’t see demand rebounding soon, this seems like a great time to start retiring those planes, no?

Could Delta retire some 767s early?

What aircraft orders could Delta defer?

While details about plane deferrals haven’t yet been published, Delta has quite some aircraft on order, including:

  • 14 A220-100s
  • 50 A220-300s
  • 27 A321s
  • 100 A321neos
  • 32 A330-900neos
  • 16 A350-900s

Could Delta defer delivery of their remaining A350-900s?

That’s a lot of Airbus planes. What is it Delta always says about protecting American jobs? 😉 (Yes, I realize some of these are built in the US, but…).

I imagine Delta is still in the early stages of negotiating aircraft deferrals, so I imagine we’ll find out more soon. I’m guessing they want to defer as many of these as possible.

Delta asking White House and Congress for help

I don’t think I need to point out the irony in this, but Delta notes that they’re in discussions with the White House and Congress regarding any support they can provide throughout this period, and Bastian is “optimistic” that the company will get support.

He notes that the form and value is unpredictable, and they can’t put the company’s future at risk of waiting on government aid.

Delta remains optimistic

While the note says that the situation is expected to get worse and more critical decisions will have to be made, Delta is still optimistic:

“Delta remains better-positioned to weather a storm of this magnitude than ever before in our history. We’ve spent a decade building a strong, resilient airline powered by the best professionals in the business. We will get through this, and taking strong, decisive action now will ensure that we are properly positioned to recover our business when customers start to travel again.”

Bottom line

Delta has historically been by far the strongest of the “big three” US carriers, so their reaction should give you a sense of just how bad things are for the airlines. It’s one thing for the airline to ground planes and cancel flights, but they’re even asking for government aid? Wow…

Comments
  1. Delta is better positioned to get costs out of its system in order to make a massive cut in capacity than any other US airline.

    Delta stock is leading the industry up at this hour.

  2. @Ben

    Source? If this is an internal memo to employees why are you blogging partial details? It would be more responsible to wait for public confirmation and more information. Apparently, you have been caught up in the breathless reporting, and the rush to be first. Just my thoughts.

  3. Oh cry me a River. Basic rule#1: don’t f over your customers because without them you have no company. Karmas a bitch.

  4. That’s odd, I thought Delta was morally opposed to government financial assistance according to the various lawsuits they have filed over the years?

    Odd indeed.

  5. @ Ben — Of course they’ll get money fro Trump. All they have to do is donate 10% back to his campaign.

  6. Government aid! Hah! This from the biggest basher of QR, EK and their unabashed government aid! Next we’ll see LH ask for it, after slamming LOT for running on government aid!

  7. Delta and United have been hit especially hard. Korean Air is about to go bankrupt and KLM/Air France hubs now basically shut down. Delta’s hands are tied. United was extremely exposed in China and now their Lufthansa hub in Frankfurt is off limits. American is partnered with BA which is, as of now, not affected by the flight bans. Also, they are partner with Japan Airlines and Qantas which allows them to connect passengers if need be. Not to mention their bare bones/Spirit type product cost less than United or Deltas. Eventually American will have to do drastic cuts as well but they have more cash on hand and less costs at the moment. And we all know Doug will have zero problem disbanding all beverage services and just offer water if it came to it. He won’t care to have premium service be turkey sandwhich and a coke if it means saving money in survival mode. I’m all for tax breaks, tax deferences, slot easements, etc. But if Delta is truly asking for some sort of bailout Delta risks extreme public backlash. Americans are still angry about 2008 bailouts and the appetite isn’t there. Yikes. This is nuts.

  8. @JCDCA

    Ben referenced a memo to employees. Since when does “ll over the news, Twitter, etc.” mean anything. Read the post.

  9. Help for what? They charged me over $10k for a business class ticket to Europe for the last 5 years. They should have enough cash.

  10. One measure to be looked at is to end cabotage and allow foreign airlines to buy US carriers. The employees will not have nothing to scream about. Every airline will eventually be asking for government help-Lufthansa has asked

  11. I demand delta change back to old elite requirement system before asking government for “help”. Airlines grew too arrogant after mergers and now begging for help… ridiculous!

  12. They’re not offering refunds to customers for these “cancellations” to my knowledge, I believe they are holding the cash and deferring revenue recognition until flights are taken.

    If they were issuing refunds I’d be a bit more sympathetic, but holding their customers’ cash and then asking for federal money stinks in my opinion.

    All of the Big 3 have been so customer unfriendly that it’s going to be difficult to get any sympathy…. Tighten your belt like other businesses will need to do and ride it out without a bailout from taxpayers that you have been treating as if they were lucky to be doing business with you….

  13. I don’t mind helping /bailing the airlines out at a difficult time. They are an integral part of the fabric of our economy (likes banks, hospitals, etc) – we can’t just let them all fail.

    However, we should expect something in return. Last time we gave significant assistance (around 9-11) they rebounded and then all they did was add fee after fee after fee while decreasing legroom. Thus it makes it hard for us now to show goodwill.

  14. BA have taken the opportunity to also retire and “scrap out” 3 of its A319’s which were flown to St Athen yesterday.

  15. As we know, Delta is the market leader and their actions will protect their shareholders the best in the future.

    Under Ed’s leadership, Delta has soared to new heights and I am confident that they will rebound from this situation. Delta’s costal hubs are strategically located, to quickly rebound after this situation as its highly educated consumers in these costal cities (LA, NYC, Boston & Seattle), will quickly return to traveling.

    Due to Delta’s success, they are uniquely position to be in a solid economic foundation after having just received two months worth of salary through their profit sharing agreement.

    I wish Delta the best, and know they will survive. American on the other hand..I’m not so sure

  16. “The CDC estimates that so far this season there have been at least 22,000 deaths, 36 million flu illnesses, 370,000 hospitalizations.

    But hey, let’s wreck the economy, dive into isolation, cancel everything, and completely over react to 1,700 affected people. Well done people. Way to let the media call this one. Stupid people. All you fear mongers will be crying when you or someone close to you all lose your jobs in 3 months (or less).

  17. Just incredible. Hopefully the government can bail these guys out. I would hate to see the airlines have to start charging onerous change fees or baggage fees or whatever else they can think of whenever things get back to normal. /s Seriously I have no doubt our politicians will give them whatever money they ask for with no strings attached. And our Washington clowns wonder why they are held in such low regard,

  18. @DTG
    I thought US Dept of Transportation rules require refund of the ticket if the airline cancels the flight and the passenger does not accept an alternative flight or airline credit. Or, did this rule get thrown out?

  19. you dont really get it do you, Mr Obvious. 1,700 is only the tip of the iceberg. Look at what happened in other countries like Italy. It’s about to happen here.

  20. “Delta asking White House and Congress for help”
    Nooooo…not the best run most profitable airline in the US. How can that be?? The Delta cheerleaders will have to put away their pom poms now.

  21. Bye-bye DL-KE-AM-LA-VS-AF/KL-MU, aka ‘Delta Partners’ or ‘Etihad Partners v2’. DL would certainly have been in a better position if they had not thrown their money around.

  22. @Mr. Obvious – don’t be a Trump-esque dotard; the # of cases are so low only because the (Trump-budget-cutting) CDC has been hamstrung in getting out testing kits.

    Read the Medium post and educate yourself – will be in the 5 figures in a week or two.

    Moron.

  23. Airlines worldwide will be given help by their governments. It is simply a given.

    The bigger concern is what will happen to cruise lines and are even amusement parks which are leisure oriented and have much less strategic value to the economy.

  24. NO BAIL OUT for these airlines. They merged and merged, jacked up prices and screwed the consumer anyway they could.

  25. The airlines have mistreated pax for the past decade. It will be great if they failed since I have very few skypesos. Just last week I had to grovel to get them to cancel a three person award booking, now they ask for government help.
    I will agree to have tax funded help if they,
    1, Pay their 100 top executives a living wage for 3 years. Not to exceed their lowest paid employee wages.
    2, Agree to share 50% of profits with the treasury for the first 5 years after returning to profitability.
    I am not advocating for Government ownership, just a limited time cost to reimburse taxpayers.

  26. So ironic that delta is asking for government aid. If our government were to give a bailout/aid to airlines, at a minimum the following 3 conditions should come with the bailout/aid:

    1) Management of airlines that were poorly performing from an operational and financial prospective before the Coronavirus outbreak should be replaced. If our government is making an investment in these airlines, only top tier management should be running these airlines to ensure that the government is returned their investment and are the airlines operated efficiently to help customers.

    2) Going forward, if airlines are such important national institutions that they require a bailout, they should have similar restrictions on share repurchases and dividends to investors, similar to current restrictions to important financial institutions that were enacted after the 2008 financial crisis, which makes the Federal Reserve approve dividends and share repurchases for large banks. Airlines have paid billions of dollars in share repurchases and dividends to shareholders over the last decade and if we were to bail them out, we should make sure in the future they have cash reserves to withstand down economic times.

    3) Any bill that gives the airlines assistance should also include consumer protections similar to provisions in the European Union (specifically EU Regulation 261/2004). Over the last decade when business has been profitable, airlines have treated consumers poorly and in some cases with complete contempt (i.e. United Airlines treatment of Dr. Dao). If the airlines are asking the same people they have treated poorly over the last decade to have their Federal government provide assistance, the least the people providing the bailout should expect to get in return would be rules/regulations that allow them to be treated fairly going forward.

  27. Hey dotards, it’s the same over reaction for 100,000 cases as 1,700. Hear that flushing sound…its the sound of what all you “Peters” are doing to our economy. Yeah, let’s not think about all those poor people that are going to lose their job and their healthcare when they need it most. Heaven forbid that we go about with a little normalcy to let this thing do what it needs to do so that we start to generate some natural human generated resistance.

    But go ahead, be all liberal like and keep throwing out that Trump word, bcuz it makes you feel just a little better about yourself. Easy to blame someone vs realizing this is nature running its course.

    BTW – Peter was the name of the boy that cried “WOLF”!

  28. I think government aid would be in terms of no taxes/fees or very limited ones. I think the government (if thinking intelligently) would rather allocate their physical money and resources to helping contain the epidemic so relief from things under the government’s control seems like the only good option.

  29. I agree with @T James with this. If they want the public’s help they should be held accountable.

  30. There should be zero bailouts for these airlines because they have been criticizing ME3 for getting handouts from their government so US3 should lead by example. Zero bailouts for them! Maybe this will shut US3 up once and for all next time they criticize ME3. But we all know once this critical period passes, they will be criticizing ME3 again. These CEOs sure has short term memories…

    If US3 gets bailouts, then government should put in strict requirement that 1. they cannot devalue their frequent miler points for at least a decade 2. They all must revert back to the old redemption chart before the dynamic redemption came along.

    But we all know they will get their bailouts and continue to treat their frequent milers like crap, add more fees to everything, and bad mouth ME3 while giving crappy products to American flying public.

  31. All these negative comments – literally mullions of people worldwide are employed within the travel industry. Worried about their jobs
    Those of you who are customers of the airlines making these comments – morons

  32. @JB
    There will likely be tax abatement but the most likely assistance that has been discussed is guaranteed loans.
    Delta’s work to get its debt down over the past 10 years and will be viewed as a low risk client, just as would be the case by any lender.
    Some other airlines also have strong balance sheets and could service debt.

    The President’s press conference is going on right now and it is a who’s who of private enterprise that is partnering with the government to tackle this problem.

    Delta leadership recognizes that they have to do what is necessary to help themselves but they also know that airlines will play a key role during the virus crisis and in the rebuilding period afterward.

  33. Just as an aside,
    It will take years to return to the old times. Business will finally realize that possibly 70-80% of their travel is not necessary. Leisure travel will probably recover to previous levels but it might take a year or two to return totally. The loss of premium business travel will rock the industry.
    To restate, these trends will cause huge ruptures in the economics of travel industry firms.
    I have been travelling for decades on my own dime and I always was astounded by what was so necessary for teams of clueless executives to be travelling (at shareholder expense) while risking letting their meeting counterparts realize how stupid they were.

  34. I think this is about protecting jobs. There are millions of people employed in the airline industry in this country alone. Imagine millions losing their jobs, millions not being able to travel for business, and the economic impact of travel on this country.

  35. On DL fleet plans, a lot of this will depend on how quickly, and by how much, they expect demand to come back after the peak of the coronavirus emergency. If they retire a lot of planes and defer deliveries at the same time, they run the risk of getting caught without enough parked planes to ramp back up quickly. If Airbus is going to slow production, they may choose not to defer as aggressively, since their delivery dates will be deferred anyway and DL won’t lose their places in the delivery queue.

    I wouldn’t be surprised to see AA, AS, and/or UA taking advantage of the drop in demand to reconsider the future and cancel 737 MAX orders in favour of new A320 family orders.

  36. Don’t be an idiot with the comment about Delta protecting American jobs while buying Airbus airplanes. Look at the American content in any Boeing or Airbus airplane. The industry is global, you don’t need to fan the flames with inaccurate representations seemingly trying to cater to nationalism. You supposedly been around, act like it.

  37. Keep the Airbus plane orders, their planes are freaking amazing, smooth and quiet!

  38. Only government-owned airlines should be allowed to receive state support. We’ve seen these airlines spurn governmental involvement during times of strong profits. Thus they can live (and die) by their course of action.

  39. While the irony is interesting to see at first, the reality is that DL, et al, were opposed to ongoing subsidies for carriers during NORMAL economic times/circumstances. These days would hardly qualify as ‘normal.’ That being said, I never supported the US3s stance against the ME3, I’m just pointing that out.

  40. @Scott Airbus employs quite a few people in this country and it’s not anyone else’s fault, except their own, that Boeing is having safety concerns. I guess you don’t purchase anything that isn’t made in America then.

  41. I didn’t see anywhere Delta is asking for money yet. If Ed is wise, he would let UA/AA take the fall and just tag along for the support. Just like Ford did when GM Chrysler asked for money.
    If anything Ed is sending a message out that airlines will in big trouble soon if nothing is done by the government (besides hurting even more)

    @Miss Obvious

    Did you just got laid off?

    I agree the public do overreacted. But it’s so obvious (again how can you miss it) that the magnitude of this is much larger. You yourself believe it was a pandemic weeks ago. But the numbers doesn’t say so. Why? Because many are already spreading in the community but can’t get tested. No test no quarantine no stopping the spread.

    It comes to a point we have to realize we were lucky again. This isn’t as deadly as SARS and we got lucky SARS went away on its own.
    I can’t imagine if the next one is as deadly as SARS, stealthy as COVID-19, spreads like measles, and survives like HIV. Humanity will never be the same.

  42. Doug Parker said that the meeting with the POTUS went well and nobody in the industry asked for help. He also noted they didn’t need help and would be fine. Now the mighty Delta needs help. Hope all the Delta employees enjoyed Profit sharing this year, wont be another one anytime soon.

  43. Mr. Obvious, where do you get your news from, Rush Limbo? Do you think China and Italy shutdown their economies for the heck of it? Please re-post on OMAAT a year from now and let us know how irrational COVID-19 was…

    You’re an idiot.

  44. The government will bailout Delta but Trump and the Washington State elected officials will make Delta agree with the 767/757 replacements better be with Boeing like the 787’s. And how many times in our lifetime are we going to hear to big too fail.

  45. Aviation and all transport is critical to the economy. If the industry requires support, amongst other industries, then that’s in the best interest for all of us.

    Also, forget the whole Boeing v Airbus talk. Both rely on global supply chains that employ many people, including many Americans, and Airbus also manufactures in the USA.

    I’m not a DL flyer, but it’s clearly a well managed company. If DL makes this statement, then all the more reason to support. The Airlines for America association, as well as IATA, will likely soon announce similar statements.

    As for grounded fleets, I’m assuming that wide-bodies will be first impacted (obviously, with international markets being closed) , whereas the A220, A320/321, B737 (not MAX of course) are the right capacity for reduced domestic market demand.

    Also, though AA/oneworld benefit by the UK remaining open (for now), AA is going to be in a world of hurt with PHL not being on the approved list of US airports for European arrivals. BOS right up there with PHL. I wonder about IAH. MIA/CLT/MSP/others don’t have that many daily European arrivals. Anyone else wonder why in the heck HNL is on the approved list with no European arriving flights????

  46. I’m with Mr. Obvious and Icarus. The over-reaction to this has me shaking my head. Something else is going on here–something nefarious. Tragic for all those in the hospitality and restaurant businesses. My heart breaks for them. (Booked on Delta in Jun. I plan on keeping the rez unless those pushing this economic debacle make it impossible for me.)

  47. @The nice Paul – I believe the nation of Qatar itself is facing multiple shocks at once and acting in a private equity-like capacity they will respond accordingly. I should add that by “implode” we may see a situation similar to Etihad where there is a pivot from a growth mentality to one of extreme cost cuts.

    Pure speculation on my part and I could absolutely be wrong.

  48. It would be interesting to read an analysis of a “doomsday” scenario of the Big 3 all going under and what would occur.

    Given the way we have been shite on lately I am almost all for it.

  49. All of the Middle East airlines have existed because there was enormous demand relative to the international capacity that carriers in Asia, Europe and N. America offer.
    Qatar could exist even with subsidies because everyone else had enough business even with their complaints about Qatar’s subsidies.
    With the collapse of air travel, QR can’t siphon off traffic and the largest airlines worldwide will be supported by their governments which means the focus will return to making sure those airlines can survive. QR and airlines that siphon off traffic suddenly are “outsiders” to national interests.

    No one knows how long this will last or how much revenue will be lost. It makes all the sense in the world for Delta and any other company to be asking for help even if they come up with other ways to survive.

    Delta is the most efficient, lowest cost US legacy carrier. If they can’t make it, the rest of the legacy segment and the longhaul networks they operate can’t survive. Just as after 9/11, helping legacy carriers was deemed necessary because the government recognizes that legacy carriers provide services which low cost carriers cannot.

    Low cost carriers are not immune from this like they were post 9/11. The post 9/11 restructurings were about inefficient and bloated legacy operations. All have been profitable – to varying degrees recently. Demand will fall and it will hurt all airlines. Because legacy airlines have figured out how to compete with ultra low cost and low cost carriers, they can and will compete aggressively for passengers they may have been content to let other carriers take. However, low cost and ultra low cost carriers cannot provide the service that legacy carriers offer.

    Every US airline will be asking for help if it is offered.

  50. Well, if we are going to be this fearful of a virus, and this is a new precedent, then no more sports leagues, and no more traveling, and no more school during the yearly winter flu season. It’s a mega-killer, but we dont report on that!

  51. @ADP
    You’re right, Qatar has/ is facing multiple shocks (the biggest of these, the Saudi-led boycott, is still in place).

    But Qatar (the state) has a long-term plan. The football World Cup May look like just another sports event: in Qatar, it’s seen as a huge, once-in-a-lifetime pivot event, which among other things will force social and legal change (eg, accepting visitors from Israel, welcoming LGBT+ visitors, even more changing alcohol and dress laws). Infrastructure development is on a scale difficult to imagine.

    But the unified sense of political optimism in the country is also unfamiliar to most of us from western democracies; and, ironically, the Saudi-led boycott has really reinforced that (it’s the Qatari equivalent of the UK’s “Blitz spirit”, the sense of social solidarity that grew rapidly during the Second World War in the face of German bombing of British cities).

    And Qatar now has experience of managing massive changes: within a few days of the start of the Saudi-led boycott, Qatar had new supply lines in place for everything from vegetables to milk (and much of that was operated by its airline).

    Which is not to say there won’t be changes. But just as rich people in our countries are usually better-placed to weather storms (if you can afford to panic-buy bulk goods, you’re already in a better position), so rich countries like Qatar will be in a less vulnerable place.

    Qatar isn’t high up my list of countries likely to be worst-affected by Covid-19.

  52. “The speed of the demand fall-off is unlike anything we’ve seen” ???

    Uh? The drop in demand was far faster after 9/11.

    Lies, lies and more lies.

  53. All that self promotion about refunds, I just had to cancel 2 trips. The one from Seoul to ATL, they did fully “refund” my awards points with no fees.

    The one BHM to LAX, they did “waive” fees but no refunds, only a credit until Dec. I can’t transfer the refund to family who can use it nor can I use it to book a flight for them?

    So, they patted themselves on the back and, basically, kept my money.

  54. I’m a Delta flight attendant based in ATL, 23 years with Delta. I’m taking the unpaid leave Delta is offering so that I can help junior people not to be furloughed. Many of my flight attendant friends are stressed and having anxiety over this situation. Please pray for us.

  55. @Mary Eng
    There are many prayers on many levels for this situation. After years of good times, airline employees like yourself are facing times which you have faced before but don’t want to see again.

    Do you mind sharing how soon Delta is asking for decisions from employees and how long the leaves are that they are offering?

    Also, the US has just decided to extend the ban to include the UK and Ireland so Delta’s flights to Africa will likely be the only transatlantic flights operating for now.

    This is simply unprecedented.

  56. Delta is acting fast with cutting cost. They are communicating with us everyday and keeping us in the loop. They are offering flight attendants 1-4 mth unpaid leaves and the other department 30,60,90 days. Leave starts April 1st.

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