Delta posts USD5.4B 3Q loss as pandemic hammers travel

WASHINGTON (AP) – The summer travel season was even worse than expected for Delta Air Lines, which said on Tuesday that it lost USD5.4 billion in the third quarter as people hunkered down at home during the pandemic.

Delta officials pushed back their timetable for breaking even, from year-end to next spring, as their previous expectation that COVID-19 would be contained proved too rosy. The airline’s shares fell almost three per cent on Tuesday.

However, Delta’s executives said passengers are starting to return and bookings for Thanksgiving and Christmas are looking up.

“It’s slow, but it’s steady – week by week, they are coming back,” CEO Ed Bastian said of passengers.

Bastian said Delta plans to stop blocking middle seats in the first half of next year. That would reverse a policy that Delta has used to distinguish itself during the pandemic from its closest peers, American Airlines and United Airlines, who do not block seats.

The number of people screened at US airports is down 65 per cent this month, compared with last October, but that’s better than the 68 per cent decline in September, the 71 per cent drop in August and the 96 per cent plunge in mid-April.

Several dozen mothballed Delta Air Lines jets are parked on a closed runway at Kansas City International Airport in Kansas City. PHOTO: AP

Most of the people flying now are low-fare leisure travellers. Bastian said business travel is down 85 per cent but that most corporate customers are putting at least a few employees back in the air.

Bastian said video technology might replace some trips, and there could be a 10 per cent to 20 per cent drop “in the next couple of years when we get to that new normal of business travel.” Some analysts found that troubling.

“Business travel was 50 per cent of their revenue at one point,” said Peter McNally, an analyst at Third Bridge Group in New York. “It’s a market that Delta has made the core of their business, so they will be forced to compete harder on the leisure side of the market to make up for that loss.”

Atlanta-based Delta’s loss compared with a year-ago profit of USD1.5 billion and nearly matched the loss of USD5.7 billion in the second quarter, when the pandemic brought air travel to a near standstill. Since then, Delta has concentrated on hoarding cash – it raised USD9 billion by mortgaging its frequent-flyer programme – and cutting costs.

Delta reduced its cash-burn rate to USD18.4 million a day in September from USD26.1 million in July and August, and Bastian predicted it could reach break-even cash flow by spring.

Investors are watching cash as a gauge for how long carriers can last in the industry’s current depressed state.

Cowen airline analyst Helane Becker said she was not surprised that Delta said it would take more time than expected to hit break-even.

“Air travel demand has been improving, but the pace of the recovery has been slower than what the market wants to hear,” she said.