Just when things were starting to look positive for the airline industry, the pandemic took a turn for the worst. On Tuesday, Delta Air Lines became the first major domestic carrier to respond to the downturn by cutting its schedule back...again.
Despite reducing its daily cash burn by more than 70 percent from when COVID-19 kicked into high gear, the airline still had a $3.9 billion adjusted pre-tax loss for the June quarter on a more than $11 billion decline in revenue over 2019. That alone left Delta with no option but to pull back on its plans to add flights. In reporting the loss, Delta’s CEO Ed Bastian said it “illustrates the truly staggering impact of the COVID-19 pandemic on our business.”
Bastian had been guarded all along, predicting that it could take up to three years for the airline to financially recover from COVID-19. However, the executive pulled back a tad on that three-year mark, saying it would be at least two years before the airline sees a “sustainable recovery.”
“In this difficult environment, the strengths that are core to Delta’s business -- our people, our brand, our network, and our operational reliability -- guide every decision we make, differentiating Delta with our customers and positioning us to succeed when demand returns,” he said.
Consumers are pressing pause
Airlines can take out all the seats and implement all the checklists they want, but with the number of COVID-positive cases spiking again and states rolling back their reopening, consumers are starting to rethink their travel plans.
Particularly troublesome for Delta is the explosion of cases in Southern U.S. markets, which it has a firm grip on out of its Atlanta hub. Originally, Delta had planned to add 1,000 flights a day starting in August, but Bastian says that number has been cut in half.
"Those factors are causing consumers to pause," Bastian said in comments given CNBC. "At the start of the pandemic, we said this recovery was going to be choppy. Indeed, it's been choppy. Demand has stalled as the virus has grown."