Delta CEO: Airline Is Operating At Less Than 5% Capacity; Will Be A Smaller Airline
Over the past week, we’ve seen airline CEOs discussing the future of their industry and companies. In a memo to employees, Delta Air Lines CEO Ed Bastian told employees the recovery could take 2 to 3 years and that the airline is operating at 5% capacity. That’s not surprising given recent takes by economic analysts, but it is worrisome for airline employees.
We are confident that people will begin to travel again,” he told employees in a memo. “We don’t know when it will happen, but we do know that Delta will be a smaller airline for some time, and we should be prepared for a choppy, sluggish recovery even after the virus is contained. I estimate the recovery period could take two to three years.
In an interview on Wednesday with CNBC, Ed Bastian said, “The challenge in the business right now is demand, with all the stay-at-home orders and the challenges with respect to travel.” Bastian continued by saying, “We’re operating right now at less than 5% of the normal passenger load. I think today we’re operating with about 30,o00 passengers on our books.” Bastian noted that those passengers are mostly essential workers.
What Other Airline CEOs Are Saying
Last week, Southwest Airlines CEO Gary Kelly told employees he wants to avoid furloughs. But Kelly also said that avoiding furloughs requires a rebound in passengers. At the end of March, United Airlines CEO Oscar Munoz painted a sad picture of the airline industry’s short term future. In remarks, Munzoz said employees should expect layoffs after government bailout strings end in September 2020. He also said the impacts will last beyond this year.
Delta Quarter One Losses
This morning, Delta reported its quarter one earnings. Delta lost $534 million over the quarter, its first loss in five years. While the news is not good, Delta stocks moderately increased after surpassing expectations. United Airlines announced a loss of $2.1 billion in quarter one earlier this week. Airlines are bracing for more severe losses for quarter two. It will be the first where the entire quarter is impacted by coronavirus.
There is nothing entirely shocking in Ed Bastian’s remarks. Data shows that airlines around the world are operating at a much lower capacity, so much so that Southwest Airlines recently became the world’s largest airline. But they stand again as a stark warning that worse days are ahead for those in the airline industry. In particular, airline employees will have a period of uncertainty. That will only increase after September 30, 2020, when airlines will no longer have to keep people working as a condition of stimulus money.