Delta anticipating recovery to begin in earnest in H2

The airline says the demand environment will remain “choppy” until the wider rollout of COVID-19 vaccines. 

Delta Air Lines CEO Ed Bastian foresees “an inflection point” sometime in the second quarter of 2021 after which the airline industry will begin a “sustained recovery” from the COVID-19 crisis. 

Bastian told analysts and reporters on Jan. 14 that “as vaccine distribution continues, travel restrictions start to ease, and consumer confidence begins to grow … we expect demand will start to accelerate as vaccinations become more widespread, and the virus is in a contained state, and customers gain greater confidence to make future travel commitments.” 

Delta president Glen Hauenstein added that the airline sees three distinct phases in 2021. “The early part of the year will be characterized by choppy demand recovery and a booking curve that remains compressed, followed by an inflection point, and finally a sustained demand recovery as customer confidence gains momentum, vaccinations become widespread and offices re-open,” he said. “For each phase, Delta has the levers to pull to successfully react to the emerging demand environment, including tightly matching our sellable capacity to expected demand.” 

He noted that leisure markets and sun destinations “are the best performers in our network,” adding: “With our approach of targeting salable capacity to match demand, we are biasing restoring capacity to leisure markets. As a result, roughly one-third of our domestic capacity is currently deployed into leisure destinations.” 

Atlanta-based Delta is seeing weakness at its coastal hubs, “especially New York [JFK] and Boston [BOS],” Hauenstein said. “International demand remains weak and is limited to essential travel. That said, we continue to work towards opening additional COVID-tested lanes of travel with no quarantine on arrival, similar to our Atlanta [ATL] to Rome [FCO] and [ATL] to Amsterdam [AMS] flights. This will be important in restoring confidence in long-haul international travel as vaccine rollouts continue.” 

Delta, which reported a $12.39 billion net loss for the full-year 2020, anticipates a big boost from corporate travel—which has disappeared during the pandemic—in the second half of 2021.

“Our corporate accounts are telling us that they largely anticipate returning to their offices and travel in the June and September quarters,” Hauenstein said. “They are also telling us by the end of 2021, half are expecting to return to 50% to 100% of pre-COVID domestic travel, and up to 50% of pre-COVID international travel.” 

“All indications are that corporate travel is ready to come back in the second half of 2021,” Bastian said. 

Delta restructured its aircraft orderbook in 2020, reducing aircraft purchase commitments by $2 billion in 2020 and $5 billion through 2022. It retired 227 aircraft in 2020. “Delta anticipates the cumulative retirement of nearly 400 aircraft through 2025, further simplifying fleet families down to nine [from 13 prior to the pandemic],” Delta said in a statement. The airline will have 200 fewer aircraft in its fleet at the end of 2021 compared to the end of 2019. 

Delta is the last of the US carriers to block middle seats on flights, a practice it has pledged to continue until at least March 31. Bastian said blocking middle seats is “driving a meaningful premium” and differentiating Delta from its competitors. When and if the airline will start selling middle seats again is “very much driven by customer demand,” Bastian added. 

Photo credit: Delta Air Lines