With second-quarter revenue down more than 90 percent year over year, Delta Air Lines is bracing for an uneven recovery in the coming months that largely will not include corporate travelers.
Delta reported adjusted revenue, excluding refinery sales, of $1.2 billion in the quarter, down 91 percent compared with the second quarter of 2019. Delta's capacity was down 85 percent year over year in the quarter.
With some capacity returning this month, Delta has seen a "small but welcome uptick" in demand largely comprised by domestic leisure travelers and those traveling for essential reasons, CEO Ed Bastian said in an earnings call. Business travel, which accounts for about 50 percent of Delta's revenue, has "not yet returned in any meaningful way," and the recent acceleration of Covid-19 cases in several states, quarantine restrictions put in place in major markets including New York and Chicago and the return of restrictions in Sun Belt states have stalled recovery. The timeline for a return of international demand remains even more uncertain.
"We thought from the start that the recovery would be choppy, and the past few weeks proved that would be true," Bastian said.
Revenue in the third quarter likely will be a bit stronger, between 20 and 25 percent of what Delta made in the third quarter of 2019, Bastian said. That figure accounts for Delta's current capacity caps to ensure spaced seating—a policy that differs from Delta's major competitors but that Bastian said likely would be extended beyond its current Sept. 30 expiration.
Bastian projected that a "sustainable recovery" for Delta would take two or more years. While the approximately 20 percent of business travel that Bastian called "unproductive" likely would not return, he said business travel would "come back in scale."
"There's a lot of inefficiency in business travel, and the number of trips the average road warrior takes is going to come down in certain cases," Bastian said. "It will be trips focused on relationship-building, interacting, reviewing performance on a global scale. Those are going to stay. I don't think we'll ever get back entirely to where we were in 2019 in the volume of business traffic, but the resiliency of business traffic that we will now bake into our business model going forward will be a better way to measure the sustainability of the recovery."
Delta reported a net loss of $2.8 billion for the quarter. Daily cash burn for the quarter was about $43 million, but in June was $27 million per day, about 70 percent lower than the levels seen in late March. The carrier expects to reduce cash burn to breakeven levels by the end of the year.
Delta's operating expenses were down 53 percent year over year in the second quarter. That includes an 84 percent decline in fuel costs and a 90 percent decline in maintenance expenses, with more than 700 aircraft parked. Delta's second-quarter expenses from salaries and benefits were down 24 percent year over year, due in part to more than 45,000 employees taking voluntary unpaid leaves.
RELATED:Delta Q1 earnings