Delta Air expects to break even around spring of next year
Delta Air Lines Inc., bleeding cash because of the COVID-19 pandemic, expects to break even by next spring as rising demand prompts the carrier to continue restoring flights, Chief Executive Officer Ed Bastian said.
“We are in the process of recovery, there’s no doubt about it,” Bastian said Thursday on Bloomberg Television. “There are clear signs the momentum we have is meaningful and continuing to build.”
The Atlanta-based airline plans to add around 1,000 flights a day to its schedule in July and again in August, he said.
Carriers worldwide have been pummeled by a collapse in demand from the novel coronavirus and travel restrictions to help contain its spread. U.S. airlines that had slashed flying have begun to put more planes in the sky as states lift stay-at-home orders and other limits on activity. Delta expects to operate about 30% of its year-earlier flying schedule by the end of September.
“We’re at 15% of revenues today and we hope to get to 30% over the next two or three months, keeping costs at that 50% level,” Bastian said in the interview, with David Westin. “I would imagine by the spring next year, we’d be at a point where we’re breakeven.”
Delta dropped 2.6% to $29.93 at 9:35 a.m. in New York as stocks fell broadly on concerns over new outbreaks of the virus in China and the U.S. The carrier’s shares had tumbled 47% this year through Wednesday, while the S&P 500 declined 3.6%.
The U.S. Labor Day holiday in early September will be “an important milestone and pivot point” because it’s typically when business travel starts to build after summer, Bastian said. Many companies continue to restrict travel, a crucial component in airline profits.
“That will be the next stage of recovery,” he said.
The outlook is not as promising for international operations, which have largely been suspended as some countries extend travel restrictions and require 14-day quarantines for arriving passengers. International travel will lag behind the U.S. domestic recovery by as much as 12 months, Bastian said at the company’s annual meeting later Thursday.
Delta is on track to burn about $30 million in cash daily this month, better than its target of reducing the figure to $40 million from $100 million earlier in the pandemic, Bastian said. He expects to reach zero by year-end. The airline has cut operating expenses by 55% since the coronavirus outbreak began to affect travel in March.
Bastian said he doesn’t expect widespread layoffs at Delta after Sept. 30, when prohibitions against job cuts that are part of federal financial aid expire. About 40,000 employees have taken voluntary leaves ranging from one to 12 months, and the carrier has offered early retirement and voluntary separation programs.