Surging coronavirus cases and the stalled U.S. Reopening have undercut Delta Air Lines’ summer travel plans—and will continue keeping its planes relatively empty into the fall.
The airline on Tuesday halved the number of flights it had planned to add in August, citing stalled demand as COVID-19 infections rise around the country. Delta also said it is likely to continue to guarantee passengers empty middle seats beyond the end of September, a sharp divergence from Delta’s largest domestic competitors.
“We’re committed to blocking middle seats through September and expect to continue our policy beyond that date as well,” CEO Ed Bastian told analysts during a conference call Tuesday to discuss the airline’s second-quarter results.
As the airlines try to contain the pandemic’s sweeping damage to their business and the near-total shutdown of air travel this spring, Delta is betting that allowing more distancing between its passengers is worth taking a greater short-term financial hit. The airline is keeping its flights relatively empty by not selling its middle seats and by capping each flight at 60% capacity in coach cabins.
That’s a sharp difference from American Airlines, which this month ditched its limits on cabin capacity and started selling all of the seats in its planes. United Air Lines has also dismissed the effectiveness of blocking middle seats as “a PR strategy, not a safety strategy.”
Bastian disagrees. “This is to us a really important safety feature. It’s a health crisis that we’re in,” he told analysts Tuesday, adding that Delta is reaping the benefits in positive customer feedback.
While the airline is losing money short-term by not filling planes to capacity, it is not raising fares to account for the blocked middle seats, Bastian said. This extra space on board planes has now become “the No. 1 reason why customers are choosing Delta,” he added. “Everyone appreciates it’s not going to last forever—but in the face of a health crisis, that space on board really matters.”
Fewer road warriors
Delta reported a net loss of $5.7 billion in the second quarter, swinging from a profit of $1.4 billion a year ago. After adjusting for restructuring charges and accounting related to the CARES Act that threw the airlines a federal lifeline, Delta’s second-quarter loss was $2.8 billion, compared to a year-earlier profit of $1.5 billion.
Bastian also reiterated that Delta does not expect to see air travel resume its pre-pandemic levels before at least 2022.
“Given the combined effects of the pandemic and associated financial impact on the global economy, we continue to believe it could be two years or more before we see a sustainable recovery,” he told analysts.
He also predicted that the expensive business travel that provides 50% of Delta’s revenue will be fundamentally changed by the pandemic and the now-ubiquitous Zoom calls that have almost entirely replaced in-person meetings this year.
“I don’t think we’ll ever get back to where we were in 2019 on the volume of business traffic,” Bastian said. “The number of trips the average road warrior takes is going to come down in certain cases. The international trips that we’ve all been on—where we’ve flown over to Europe for a meeting and flown back, that does nothing but eat you up—can certainly be much easily better accommodated over a video call.”
But Bastian does eventually anticipate a meaningful return of his higher-paying business customers, once companies feel safe putting their employees back on planes for relationship-building purposes (and once more countries allow Americans to travel abroad again). “Fundamentally I think business travel is going to come back, and it is going to come back at scale,” Bastian said.