Delta to park half of fleet on $2 billion March sales drop

Delta Air Lines Inc. will park more than 600 planes, or about half its fleet, as it cuts flying capacity 70% amid collapsing travel demand from the coronavirus pandemic.

Revenue this month is expected to drop by almost $2 billion from a year earlier, with April projected to be even worse, Chief Executive Officer Ed Bastian told employees Wednesday. About 10,000 Delta workers have applied for voluntary leave since the carrier made it available.

“Cash preservation remains our top financial priority right now,” Bastian said in a memo released by Delta. “Making swift decisions now to reduce the losses and preserve cash will provide us the resources to rebound from the other side of this crisis and protect Delta’s future.”

Delta fell 28% to $22.89 at 3:43 p.m. in New York, after earlier falling as much as 40%.

The Treasury Department will propose $50 billion in secured lending for airlines as part of a broader economic stimulus plan to ease the effects of coronavirus, rejecting the industry’s request that the package include nearly $30 billion in grants, according to a document obtained by Bloomberg News. “Constructive discussions” with the White House and Congress have fueled optimism that the industry will secure government support, Bastian said. The $50 billion plan includes both passenger and cargo carriers.

Carrier Cuts

Delta’s actions added to another round of cutbacks by U.S. carriers that have been caught off guard by how swiftly demand deteriorated. JetBlue Airways Corp., Allegiant Airlines and United Airlines Holdings Inc. have announced additional or new reductions since Tuesday. Carriers battered by the loss of travel also have had to cut fares and refund billions as reservations are canceled.

At Delta, international capacity will be slashed more than 80% over the next two to three months. All Delta officers will take a 50% pay cut through June 30, with a 25% reduction for company directors and managing directors. New aircraft deliveries are being deferred, along with nearly all other capital spending as it seeks $4 billion in cash savings in the second quarter.

“I know everyone is concerned about the security of your jobs and pay,” Bastian said. “Given the uncertainty about the duration of this crisis, we are not yet at a point to make any decisions.”

Changes in pay rates or jobs will be “the absolute last thing we would do, and only if necessary to secure Delta’s long-term future,” he said.

The carrier also will retire older aircraft sooner than it had planned, including Boeing Co. MD-88s and MD-90s with averages ages of 29 and 23 years, respectively, and some Boeing 767s. Delta had 47 MD-88s at the end of 2019 and 30 MD-90s.

82% Plunge

JetBlue is paring capacity by 40% in April and May, with “substantial cuts” expected in the two months after that. Average daily bookings and ancillary fees have tumbled 82% this month from a year earlier to below $4 million, while the airline issues $20 million a day in credits for trip cancellations, executives of the carrier said Wednesday.

United said Tuesday it would slash international flying by 85%, the most among U.S. carriers, while reducing service in the U.S. and Canada by 42%. The cuts expanded moves United took to reduce flying just days ago. It’s also talking with labor groups on ways to reduce payroll spending and has reduced salaries of corporate officers by about half.

Allegiant Travel Co., parent of Allegiant Airlines, trimmed capacity 15% for April and May—a figure it expects to grow to as much as 35% going forward—and halted new hiring. Construction of a Florida resort complex is being halted, the company said Wednesday.