Delta CEO Ed Bastian acknowledged that Covid-19 could
result in permanent structural change for the airline industry if cabin distancing becomes more than a short-term policy change.
Like other airlines, Delta for the time being has blocked
off middle seats to ensure social distancing on its flights. But after the crisis passes, Delta won't rule out keeping load factors in the 65% to 75% range or removing seats from the cabin.
“We’ll do whatever it takes,” Bastian said during
the carrier’s first-quarter earnings call.
The CEO was responding to a question from Wolfe Research
analyst Hunter Keay, who posed a scenario of long-term, lower load factors as
well as aircraft that are not as tightly packed with seats. Keay also asked
Bastian about the possibility of Delta moving to a business model that would
include less variation in pricing.
“We’ll have opportunities to test all of those theses,”
During his opening remarks on the call, Bastian had said
that going forward, safety in the airline industry will mean personal health
safety as well as mechanical flight safety. He said passengers’ focus on
aircraft cleanliness will translate more broadly to an increased emphasis on
“And that is our calling card,” Bastian said, adding that
since Delta will be flying fewer aircraft than it had been for the foreseeable
future, it will have an opportunity to focus on a better experience.
Delta is the first large U.S. carrier to report earnings for
the coronavirus-affected first quarter. Delta reported a net loss of $534
million with year-over-year revenue plunging 18%. Operating expenses were down
5%, driven largely by a 19%, or $383 million, decrease in fuel outlays.
Delta has raised $5.4 billion in capital since early March
to go along with the $5.4 billion in payroll support it will get from the
federal government through the Cares Act. The carrier expects operating costs
in the second quarter to be cut in half compared with what they were at the
beginning of March. The reductions will be driven by an estimated 85% drop in
flight capacity versus the prior year, the grounding of more than 600 aircraft
and voluntary unpaid leave by 37,000 employees, which amounts to nearly one-third
of Delta’s workforce.
Even with those cost cuts, Delta expects to burn through $50
million per day in May, but that’s down from the daily $100 million it was
losing during the second half of March. The carrier expects have at least $10
billion of liquidity at the end of the second quarter.