Delta Air Lines will cut passenger-carrying capacity by 40% to deal with a nosedive in travel demand, and it is talking to the White House and Congress about assistance to get through a downturn caused by the new coronavirus.
“The speed of the demand fall-off is unlike anything we’ve seen – and we’ve seen a lot in our business.” — CEO Ed Bastian
The 40% cut in capacity is the largest in Delta’s history, surpassing reductions that were made after the September 2001 terror attacks.
Delta also said Friday it will stop all flights to continental Europe for the next 30 days — possibly longer — ground up to 300 airplanes and delay deliveries of new planes to save cash.
The airline’s stock jumped 11% in afternoon trading.
Delta’s moves come as the outlook for airlines continues to get worse.
“The speed of the demand fall-off is unlike anything we’ve seen – and we’ve seen a lot in our business,” CEO Ed Bastian said in a memo to Delta’s 90,000 employees.
“We are in discussions with the White House and Congress regarding the support they can provide to help us through this period. I’m optimistic we will receive their support,” he said, adding, however, that the airline “can’t put our company’s future at risk waiting on aid from our government.”
Even before Delta’s announcement, Treasury Secretary Steven Mnuchin signaled that Washington wants to provide aid to the airline industry.
“We will be coming very quickly back on issues dealing with the airline industry,” Mnuchin told CNBC on Friday. “Just as after Sept. 11, we are very committed to make sure that our U.S. airlines have the ability and have the liquidity to get through this.”
The Combination of Fewer Bookings and More Cancellations Has Picked Up Speed
Delta is the world’s largest airline by revenue, and it has consistently been the most profitable U.S. carrier over the past decade, making its actions even more startling.
Just over a week ago, airline CEOs who emerged from a White House meeting with President Donald Trump said they did not ask for help from Washington.
However, the combination of fewer bookings and more cancellations has picked up speed since then, and the airlines’ problems were made even more dire by Trump’s decision this week to ban most foreigners from flying from Europe to the U.S. for 30 days, beginning at midnight Friday.
Delta, American Airlines and United Airlines announced fresh rounds of flight cutbacks soon after Trump announced the ban. American will stop flying to continental Europe in about a week and suspend some service to South America, while United will cut its U.S.-Europe flights by about half. The airlines had previously announced plans to reduce U.S. and international flights.
Airlines have cut thousands of flights, frozen hiring and increased borrowing to shore up their liquidity. So far, however, U.S. carriers have not announced layoffs. European budget airline Norwegian Air Shuttle said Friday it will lay off 5,000 employees — half its work force — and cancel 4,000 because of the virus outbreak and the partial ban on flying to the U.S.
Bastian said he would give Delta employees an update next week. He also said he will give up his salary for six months. The vast majority of Bastian’s compensation is in stock awards and bonuses, but those are likely to decline.
