'Unprecedented' demand drop prompts 40% capacity cut for Delta Airlines
Washington — Delta Air Lines Inc., the largest flight operator at Detroit Metropolitan Airport, is cutting its flight capacity by a record 40% because of reduced demand related to the coronavirus pandemic.
In a memo to employees sent on Friday, Delta CEO Ed Bastian said the capacity reduction is the largest in the company's history, even bigger than the company's reductions after the September 11, 2001, terrorist attacks.
Citing the suspension of many large public events and President Donald Trump's travel ban — which the White House said applies to 26 countries in Europe with open-borders agreements forming the so-called Schengen Area — Bastian said the cutback is necessary to protect the company's bottom line.
"Demand for travel is declining at an accelerated pace daily, driving an unprecedented revenue impact," Bastian wrote. "Cancellations are rising dramatically with net bookings now negative for travel over the next four weeks. To put that in perspective, we're currently seeing more cancellations than new bookings over the next month."
Bastian said Delta, which operates over 400 flights per day from Detroit Metro, is also planning to eliminates flights to most Europe destinations — excluding London — for the next 30 days, which he said could later be extended.
Delta is also planning to park up to 300 aircraft because the company's reduced capacity will require a substantially smaller fleet, he added. The airline is planning to defer new aircraft deliveries, reduce its capital expenditures by at least $2 billion for the year in a bid to preserve cash, as well as offer voluntary short-term, unpaid leaves for its employees. Delta also will impose an immediate hiring freeze.
Bastian said Delta is "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. That said, the form and value is unpredictable, and we can't put our company's future at risk waiting on aid from our government."
With that in mind, Bastian said Delta will "be making more critical decisions on our response in days to come. "The situation is fluid and likely to be getting worse.
"But what hasn't changed is this: Delta remains better-positioned to weather a storm of this magnitude than ever before in our history," he wrote. "We've spent a decade building a strong, resilient airline powered by the best professionals in the business. We will get through this, and taking strong, decisive action now will ensure that we are properly positioned to recover our business when customers start to travel again."
American Airlines Inc., which operates about 65 flights per day from Detroit Metro, announced late Thursday that it is planning to reduce international capacity for the summer season by 34%, including a 50% reduction in April trans-Atlantic capacity. The Dallas-based airline said it would continue to operate flights to and from Europe for up to seven days to ensure customers and employees can return home. The suspended American flights are expected to resume as early as May 7.
Delta shares were trading Friday afternoon at $36, up 6.81% since trading began. Shares in American were trading at $13.35, down 0.78%. The Dow Jones Industrial Average was up 4.08%, adding 864 points. And the S&P 500 gained 3%.
Delta's announcements come days after Trump announced a travel ban on 26 European countries, which will begin at 11:59 p.m. on Friday. The ban will apply to non-U.S. citizens who have traveled to one of the following countries in the previous 14 days: Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherland, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden and Switzerland.
The United Kingdom, which is not part of the Schengen Area, is notably exempt from the travel ban. But Trump said Friday that it could be added in the near future when he was asked about the U.K.'s number of cases, which has reached 798.
“Well, that was recommended to me by a group professionals and we are looking at it based on the new numbers that are coming out and we may have to include them in the list of countries that we will, you could say ban or whatever it is, during this period of time,” Trump said in a White House press conference. “But yeah, their numbers have gone up fairly precipitously over the last 24 hours. So we may be adding that. And we may be adding a couple of others, and we may frankly start thinking about taking some off.”
The Trump administration has said American citizens who are currently abroad will be allowed to return, but they will be directed to a "limited number of airports" where screening can take place, including Detroit Metro.
The travel ban comes as the coronavirus takes a growing economic toll on travel companies, cruise operators and airlines; causes stock markets to gyrate wildly; and prompts talk in Washington of payroll tax cuts and industry bailouts — potentially including the airline industry.
Detroit Metro is joined on the Centers for Disease Control and Prevention's approved list for arrivals from countries now facing travel restrictions. Others include Atlanta, Dallas-Fort Worth, Newark, Honolulu, New York-JFK, Los Angeles, Chicago-O’Hare, Seattle, San Francisco and Washington-Dulles.
Lisa Gass, a spokeswoman for the Wayne County Airport Authority, said Detroit Metro offers direct 112 flights per week to European destinations that will be affected by the travel ban, including 42 flights per week to and from Amsterdam, 28 flights per week to and from Frankfurt, 28 flights per week to and from Paris, and 14 flights per week to and from Rome.
Gass said approximately 7% of daily flights at Detroit Metro are international flights.
Detroit Metro, which typically averages about 3 million passengers per month, said before Trump's announcement that it is bracing for a decrease of approximately 100,000 passengers for the months of February through April 2020, denting its overall traffic numbers for the first quarter.
The airport, the nation's 19th busiest and Michigan's largest, had 3.25 million international passengers in 2019. The overseas travelers helped the airport reach a record 36.8 million overall passengers last year.