Delta Air Lines CEO Ed Bastian told analysts during the company’s first-quarter earnings call Wednesday that he expected as much as three years to pass before a “sustainable recovery” from the Covid-19 crisis takes hold. In the meantime, he said, Delta has begun to accelerate steps to streamline operations, simplify its fleet, and advance timelines on airport infrastructure projects as it cuts costs to address a 90 percent reduction in revenues expected this quarter.
So far Delta has managed to cut its cost base some 50 percent during the second quarter, largely as a result of 37,000 employees—or more than one-third of the airline’s workforce—agreeing to take voluntary unpaid leave, some until the end of the year, reported Bastian. Meanwhile, the airline has parked more than 650 airplanes and eliminated discretionary spending on third-party contractors and advertising.
Among the most important survival tools resides with the company’s cash position, the CEO added, buttressed on Monday by receipt of $2.7 billion of the $5.4 billion rescue package the Treasury Department has promised Delta under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
“When you combine this relief with our actions in the capital markets and our aggressive cost management, we expect to have at least $10 billion in liquidity at the end of the June quarter,” said Bastian.
Although Delta’s $422 million pretax loss in the first quarter accounted for the company’s first negative quarterly performance in almost a decade, it still ended the quarter with $6 billion in cash, reported Delta CFO Paul Jacobson. The airline expects cost-cutting measures to reduce cash burn from $100 million a day at the end of March to $50 million a day by next month. Although Delta expects the cost-cutting exercise to continue to mitigate cash burn, Jacobson said the airline is prepared for negative cash flow through the end of the year.
Bastian added that fleet retirements due to take place over the next five years will accelerate and expand beyond this year’s MD-80 exercise and will likely include the airline’s MD-90s and Boeing 757s and 767s, along with some of its small regional jets. “[On] the MD-90s, we’ll probably be making that decision soon,” he said. “We’ll be taking the time to accelerate into the future and fast-forwarding many of the decisions with simplification and streamlining our entire business model at the core of the new normal for Delta.”