Delta’s CEO has joined other airline bosses in tempering expectations of a fast rebound in flights. Delta has added flights over the summer after hitting record capacity lows earlier this year. But the airline thinks the recent additions are about as much as the market can absorb.
Delta’s CEO, Ed Bastian, has even questioned whether the additional late summer capacity is too much in light of a recent spike in COVID-19 cases. Mr Bastian thinks it will be a couple of years until things get back to ‘normal’ in the industry.
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Some recent additional capacity may be spiked
In mid-June, Delta announced it was adding around 1,000 flights to its schedules over the summer. That would see the airline operating about 2,000 daily flights by August. That still represents a year on year capacity reduction of about 70%.
Speaking at a shareholder’s call yesterday, Ed Bastian said the airline would then;
“ … take a pause, and we’ll see how demand looks post-Labor Day before we decide to add further domestic flights back.”
But Mr Bastian also warned some of the recent additional capacity might be scaled back. He cited the rise in COVID-19 cases in parts of the United States as the reason. There’s also the issue of some states imposing quarantine and self-isolation regimes.
For example, passengers arriving in Hawaii must undergo mandatory quarantine for 14 days. These rules fluctuate and change in tandem with the spread or containment of COVID-19. It makes operating an airline an extremely challenging business.
Tempered expectations due to COVID-19
The spike in COVID-19 cases will impact across the entire Delta network, not just within the United States. Usually, the airline flies to 52 countries. Most counties have closed their borders, and that saw Delta cut its international capacity by 75%.
When the outlook was slightly sunnier earlier this month, Delta ramped up some of its international flying. The airline said it would resume flying between Kennedy and Athens and Kennedy and Lisbon. In the other direction, Delta announced it would recommence its service between Los Angeles and Sydney and Atlanta to Seoul.
International flying remains in the doldrums
But as the United States continues to struggle to get on top of COVID-19, the destination countries show no signs of re-opening their borders to travelers from the United States. European Union countries are re-opening their borders next week, but they are considering barring travelers from the United States.
That would put a severe dent in plans to ramp up international capacity. Transatlantic routes are big moneyspinners for airlines like Delta. In 2019, transatlantic flying earned the airline US$6.4 billion or about 15% of overall revenue. But with 2.4 million COVID-19 cases in the United States, Europe may not welcome back travelers from the United States anytime soon.
“I think international travel is probably going to lag domestic by up to 12 months,” said Ed Bastian this week.
Across the Pacific, the reception may be no warmer. Many countries, having got COVID-19 under control, have their borders firmly shut to travelers from the United States with no plans to re-open them anytime soon. That means you have to question the likelihood of flights shortly resuming to places like Seoul and Sydney.
In this kind of environment, it is no wonder Ed Bastian is tempering expectations. He is not alone there. Airline bosses around the world are dialing back hopes of business quickly getting back to normal. Recovery is still a fair while off.