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"We're at a stall right now," Chief Executive Ed Bastian told
Reuters, saying demand that built up over June for travel to
places like Las Vegas, Florida or New York had suffered due to
fresh cases and quarantines, while picking up to some mountain
and international destinations.
The Atlanta-based carrier has scaled back the flights it planned
to add in August to 500 from 1,000.
Shares were down 1.9% pre-market.
Delta posted a $2.8 billion adjusted net loss, or $4.43 per
share, for the second quarter as passenger revenue plummeted 94%
during a season that some analysts call the worst in aviation
history.
Delta stuck to its target to halt a daily cash burn, which hit
$100 million at the start of the pandemic, though Bastian warned
it hinges on demand.
"There's a lot of risk because it's hard forecasting what's
going to happen with the virus," he said.
The airline slowed its daily cash burn to about $27 million in
June and sees a similar rate in July, with improvements as
economies open and people feel more comfortable traveling.
Delta had $15.7 billion in liquidity at the end of June. It has
not decided whether to take a $4.6 billion secured loan under
the CARES Act - available until Sept. 30 - as it eyes other
options involving similar collateral, Bastian said.
It already received $5.4 billion to cover payroll through
September under the U.S. government stimulus package.
Large U.S. airlines have warned of furloughs in October when
those funds run out, but Bastian said he hoped to avoid
furloughs after more than 17,000 employees opted for buyouts and
thousands more for extended unpaid leaves.
Over 45,000 employees have taken varying short-term leaves.
LIMITED SEATING
Delta may continue blocking middle seats beyond September thanks
to demand for comfort, but warned it cannot make money filling
only 60% of its planes.
"You can't raise prices high enough, particularly when your
competition isn't blocking middle seats and has a lot more
supply out there," he said.
Southwest Airlines <LUV.N> too is limiting seating capacity
through September, but rivals American Airlines <AAL.O> and
United Airlines <UAL.O> have added thousands of flights with all
seats for sale on hopes of picking up leisure summer demand.
Delta, the first of the U.S. airlines to report quarterly
results, is more geared toward business travel, which will be
slower to recover, but Bastian said its SkyMiles loyalty data
showed business customers traveling for personal reasons and
willing to pay a premium.
"This is something that will take two to three years for us to
walk through and we'll be very disciplined as to how we walk it
back up," he said.
Delta, which had been expanding aggressively through
international partnerships, wrote down $1.1 billion against its
recent LATAM Airlines <LTM.SN> investment and $770 million
against Grupo AeroMexico <AEROMEX.MX> after their Chapter 11
filings, and booked a $200 million charge against its stake in
Virgin Atlantic, which is also restructuring.
Delta flew 93% fewer passengers in the quarter, while its fuel
expense was $372 million versus $2.3 billion a year ago.
(Reporting by Tracy Rucinski, additional reporting by David
Shepardson; Editing by Himani Sarkar and Steve Orlofsky)
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