After apologizing during a second-quarter earnings call Wednesday to customers "who have been impacted by cancellations, delays and long wait times over the last two months," Delta Air Lines CEO Ed Bastian announced the carrier would hold capacity at its June level for the remainder of this year.
The carrier, like other airlines, has tried to handle stronger-than-expected demand this summer but has experienced significant disruptions, which Bastian acknowledged. "This quarter's operational performance has not been up to our industry-leading standards, and restoring operational excellence is our top priority," he said.
Along with holding capacity, Bastian said, Delta is working on earlier boarding procedures and "operational buffers."
"We are pleased with the progress, and July is off to a very good start with a 99.2 percent completion factor through the first 11 days of the month, which is exactly on par with the same holiday period in 2019."
Delta has hired about 18,000 new employees since the start of 2021, and its active headcount is 95 percent of 2019 levels, even though capacity currently is less than 85 percent. "The chief issue we are working through is not hiring, but a training and experience bubble," Bastian said. "By ensuring capacity does not outstrip our resources and working through our turning pipeline, we will continue to further improve our operational integrity."
Corporate Segment Improvement
The carrier's business travel segment "continues to improve," said Delta president Glen Hauenstein. Second-quarter domestic corporate sales were 80 percent of 2019 levels on a 65 percent recovery in volume, he said. International corporate sales improved 30 percentage points during the quarter to 65 percent of 2019 levels, led by transatlantic, where the recovery is now on par with domestic.
Delta recently surveyed its corporate clients and results showed "positive corporate expectations for business travel" in the third quarter, with several of the least recovered sectors "conveying strong optimism for increased travel this fall," Hauenstein said.
As the recovery progresses, Delta expects an outsized impact on its coastal hubs. "Our corporate customers expressed increased plans to travel internationally in the second half of the year given the elimination of the pre-departure test requirement for flights returning to the United States," he added.
In addition, Delta is seeing corporate clients authorizing premium travel for their employees who travel frequently, Hauenstein said. "As we move into September, we expect that to continue as we get back into a more seasonal business travel market."
Q2 Metrics
Delta reported second-quarter passenger revenue of $11 billion, down about 4 percent from Q2 2019's $11.4 billion. Total revenue was $13.8 billion for the quarter, up about 10 percent from 2019. The carrier also reported net income of $735 million, down about half of its Q2 2019 level.
Still, "financially, we have been profitable over the last 12 months, with margins this summer beginning to approach 2019 levels despite meaningfully lower capacity and a doubling in fuel prices," Bastian said.
Delta's outlook for the third quarter expects capacity to be down 15 percent to 17 percent from 2019 quarterly levels, with total revenue up between 1 percent and 5 percent.
The carrier's adjusted second-quarter fuel price of $3.82 per gallon was up 37 percent sequentially and up 94 percent compared with the second quarter of 2019. Projected fuel costs for the third quarter are in the range of $3.45 to $3.60 per gallon.
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