Delta Air Lines expects to reach a breakeven point by the spring, with corporate travel recovery following after that, executives said in an earnings call on Thursday.
The carrier is planning for three phases of 2021, Delta president Glen Hauenstein said. The first, over the next few months, will include "demand choppiness" and a shortened booking curve. Delta projects its daily cash burn in the first quarter will be in the range of $10 million to $15 million. For the second phase, Delta expects easing restrictions to lengthen booking windows and spur leisure demand, at which point they can reach a breakeven point. The final phase, in which vaccinations are widespread and offices begin to reopen, Delta projects will begin in the second half of the year.
A recent survey of Delta's corporate customers indicated that most are planning to return to offices and restart corporate travel by the third quarter, and 40 percent of large customers said they expect their travel volumes to be back to 2019 levels by 2022, CEO Ed Bastian said. Eleven percent said it would take until 2023 to return to 2019 volumes, and 7 percent said they would never get back to pre-Covid volumes, he said. The rest were not yet sure.
Of those who said they would never return to 2019 levels or are not yet sure, "even if you assumed only 50 percent of their travel returns, that gets you 75 percent of the way back no later than 2023, and I think that's the very pessimistic view on business travel [recovery]," Bastian said. "So, when we're talking about corporate travel returning, I felt optimistic when I saw those results."
In the fourth quarter of 2020, corporate travel demand was only about 10 percent to 15 percent of the prior year's levels, but corporate revenue recovery was about three points higher than what it was in the third quarter of 2020, Hauenstein said. Small and medium-sized business travel volumes continue to recover faster than large company volumes, he said.
"These are small business owners who need to get out to their customers and have to work hard every single day to keep their sales and their business moving," Bastian said. "We do see a meaningful continued improvement in small business traffic, some that we can measure and others that we can't, because they're not under contracts with us."
Delta also claimed its "highest levels in our history" of corporate business share—albeit of a small overall pie, Bastian said. In part, Delta is crediting its policy of blocking middle seats, which is "generating a meaningful premium," Bastian said. The carrier currently has extended its no-middle-seat policy through the end of March—longer than any other major U.S. carrier—and Bastian said that no decisions have been made as to whether to discontinue it after that. Hauenstein said the adding back middle seats would be a "powerful tool" to add capacity at little cost as demand warrants it.
For the fourth quarter, Delta's passenger revenue was down 74 percent year over year to $2.7 billion. Delta reported a net loss of $755 million for the fourth quarter and $12.4 billion for full-year 2020.
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