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Delta Ready for 'Surge' as Corp. Travel Outlook Improves

By Michael B. Baker / July 14, 2021 / Contact Reporter
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Delta Air Lines executives now expect corporate travel demand by September will recover to more than half of pre-pandemic levels, and their optimism in long-term recovery prospects for the segment is increasing, they said in an earnings call on Wednesday.

The carrier's corporate travel business already began showing signs of recovery in the second quarter, Delta CEO Ed Bastian said. As of June, corporate travel volume had risen to about 40 percent of its 2019 level, he said, up from about 20 percent at the end of the first quarter. Ninety-five percent of the carrier's corporate accounts had booked at least one trip last month, according to Delta president Glen Hauenstein. Boston and New York in particular have shown improvement in business demand, the carrier reported.

Travel from small and midsize business customers continues to outpace that of larger companies and has recovered to about 50 percent of 2019 levels, Hauenstein said.

By September, Delta projects corporate travel volume will recover to between 55 percent and 60 percent of 2019 levels, he said. A recent survey Delta conduced of its corporate clients indicated that 95 percent will be returning to their offices by the end of the year, and their longer-term outlooks are beginning to solidify as well, Bastian said. More than a third indicated that they expected their travel volumes to return to pre-pandemic levels sometime next year, and an additional 20 percent said that would happen in 2023. While a plurality of nearly 40 percent said they still are not sure when they will see 2019 business travel levels again, only 5 percent said that will never happen—a slightly lower percentage than the 8 percent who said so in previous surveys.

"The surge is coming," Bastian said. "Once you open business offices and get international markets opened, it's going to be a very good run over the next 12 to 24 months."

Leisure travel, meanwhile, continues to be strong, with domestic and short-haul international travel back to 90 percent of pre-pandemic levels, Hauenstein said. The carrier reported $5.3 billion in passenger revenue during the second quarter, slightly more than half of levels in the second quarter of 2019. Domestic passenger revenues were down 45 percent compared with 2019 with capacity down 19 percent, and passenger revenue to Latin America was down 36 percent with capacity down only 6 percent.

Long-haul international capacity remains down significantly, hitting about two-thirds of 2019 levels on both transatlantic and transpacific routes. Passenger revenue on both segments were down about 85 percent in the quarter compared with 2019. That will remain the case until the United States effectively opens its borders to international travelers again, though executives said demand has been strong on European routes to destinations that have opened to outbound travelers from the United States.

Even as the delta variant of Covid-19 has begun to overtake several markets in the United States and around the world, particularly those with low vaccination rates, Bastian said he has not seen any effect on demand. 

"We have not seen any reduction or drop in demand looking out over the next 60 to 90 days," he said. "Our customers are largely vaccinated, and our [employees] are largely vaccinated, and the vaccines work."

Delta reported net income of $652 million for the quarter, but that was largely due to federal relief aid. Excluding that, as well as unrealized gains on investments and third-party refinery sales, the carrier had a net loss of $678 million in the quarter, compared with an adjusted net income of $1.5 billion in the second quarter of 2019.

RELATED: Delta Q1 earnings

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