6 things we learned about Delta this week during its earnings call

Jul 15, 2021

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Delta held its second-quarter earnings call on Wednesday. It’s part of a routine carried out every three months by publicly traded companies, during which they update investors about the state of the company and answer questions from analysts.

The tone of Delta’s calls — like those of many industries — have changed dramatically since the earliest days of the pandemic. Gone are the days of discussing cash burn, reductions, and job cuts. Now the themes include aircraft acquisition, hiring sprees, and booming demand for travel.

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A few revealing tidbits emerged during the call, all of which offer insight into the Delta Air Lines that will emerge from the pandemic — and into what you can expect when traveling today. Here are six things we learned about Delta.

Call times will stay bad through summer

Customers who have tried to contact Delta in recent months have likely encountered frustratingly long hold times, even when using the airline’s text messaging service. The support that Delta agents used to provide by Twitter direct message, meanwhile, has been missing.

Even as other carriers have managed to make improvements amid the surge in leisure travel demand, the long hold times at Delta have notably remained.

Although the airline is on a hiring spree and is bringing in staff to help manage the call centers, things will likely not get back to normal before September.

“We’ll be fully back over the next couple of months,” CEO Ed Bastian said. “The service levels that customers should expect and deserve, you’ll be getting that from Delta in the next couple of months.”

More: Delta says those long call-center hold times should improve by September

“We’re hiring a couple thousand people into reservations,” Bastian said on Wednesday.

“The challenge, as I mentioned on the call, is the training,” he added. “The time it takes to get people into position.”

Business travel is returning sooner than expected

Earlier in the pandemic, even the most optimistic airline insiders had largely written off 2021 for business travel, with any meaningful recovery not expected until 2022.

But things have improved much faster than that.

“We are starting to see signs of a resurgence of business and international travel, both of which are supporting the next leg of the revenue recovery,” Bastian said.

“Domestic business travel is on an improving trajectory with corporate volumes 40% recovered in the month of June, doubling from the 20% recovery rate in March,” airline president Glen Hauenstein said. “Small and medium-sized enterprise volumes continued to outperform corporates by 10 points and are now 50% recovered.”

More: Business travel is surging back sooner than expected, but there’s still some bad news for airlines

Importantly, it isn’t just a few companies driving that increase: about 95% of Delta’s corporate accounts booked travel for June.

This is crucial for every airline. The boom in post-lockdown demand so far has been largely led by leisure travelers, and a significant falloff is expected when schools reopen and the summer travel season ends after Labor Day. Business travel, which typically offers airlines higher yields than leisure travel, can offset that dip.

“Our close engagement with customers gives us increased confidence of the acceleration of business travel, especially as we move toward the post-Labor Day period as schools and offices continue to reopen,” Hauenstein added.”

Premium seats are selling — and that could make it harder to get upgrades

Earlier in the pandemic, getting an upgrade was fairly common for anyone with even lower-level Delta Medallion status. Frequent business travelers were grounded, people generally weren’t flying, and even when leisure travel began to pick back up, there were usually seats available at the front.

But that’s not the case as much these days — and a big reason is that Delta is managing to sell most of its premium seats.

“Premium products are demonstrating resilience where demand is strongest,” Bastian said, referring to growth. “Domestic and short-haul Latin premium revenues are outpacing main cabin by five to 10 points.”

Plane upgrade: Onboard Delta’s first retrofitted Boeing 767 with snazzy new cabins

“We believe this will be reflected at the system level as premium revenue and other entities improve with the return of business and international travel at scale.”

Like United, Delta continues to see a value in premium cabins, and expects to continue growing seat availability with the broader fleet.

“As we continue to update the airline over the next several years, our percentage of seats that are in the premium cabins continues to increase,” Bastian said. “And we think given the fact that we are still in the early stages of being able to distribute those products and services to all of our customers through all of our channels, that there’s plenty of opportunity for us to continue to grow that space in the next few years.”

International demand is strong — when countries are open

Throughout the second quarter — particularly the latter part — countries in Europe began reopening their borders to travelers, particularly those who have been vaccinated.

As soon as a country reopened, pent-up demand surged, Bastian said.

“During the quarter, we began experiencing strengthened demand to select European countries as they reopened,” Bastian said. “Despite volatility in global COVID recovery trends, international travel is accelerating with capacity and load factors increasing as we head into the fall.”

More: FAA doles out $124,500 more in fines as it continues unruly flyer crackdown

“When we spoke last quarter, only two European countries had reopened for U.S. citizens,” he added. “Today, more than 15 European countries are open, and we’re seeing strong bookings follow as border closings lift.”

Delta’s experience is consistent with what other carriers have seen; as countries reopen to Americans and airlines add flights, demand grows.

Airlines expect that travel to Europe will actually increase in the fall, including leisure travel, despite the usual leisure lull between the summer and holiday travel seasons.

“We’re seeing a U.S.-based demand recovery to the open countries in the transatlantic, and we expect our loads to be close to historical levels, running probably in the low-to-mid eighties, by the August, September, October period,” Bastian said.

Notably, however, the U.S. remains closed to European visitors, and until those restrictions lift, recovery in the transatlantic market will be stunted.

“35% to 40% of our travel is still missing with the European origin piece not open for sale,” Bastian said, “and with business [travel] really not recovering at the same level as leisure.”

“So [we’re] pretty optimistic about where we can get to on this leg, but there’s a lot more to come in transatlantic.”

Heading backwards is unlikely

Even as variants emerge and cases, hospitalizations, and even deaths increase again among unvaccinated people, Delta thinks it’s unlikely that things will go back to the way they were during the height of the pandemic.

Asked whether he could envision a scenario where Delta might trim capacity or cut back on routes to domestic areas with outbreaks, or even begin blocking middle seats again, Bastian responded simply: “I don’t.”

“Clearly we’re mindful about the risks around COVID and the new variants and the continued information that the CDC provides us with,” Bastian said.

More: Delta will add 36 aircraft to fleet as it takes a different tack from United

So far, the airline has not seen a direct impact caused by the homonymous Delta variant, Bastian said, particularly in demand and bookings over the next 60 to 90 days.

“We know our customers are largely vaccinated,” Bastian said. “Our people are largely vaccinated.”

About 72% of Delta employees are fully vaccinated.

“The vaccines work and they’re giving people the ability to get back to their lives,” Bastian added. “So no, we’re not anticipating any changes at this time.”

Delta is looking into the eVTOL craze, but isn’t ready to announce anything

In February, United Airlines announced that it had invested in and placed a soft order with air taxi startup Archer Aviation — American Airlines and Virgin Atlantic co-announced a similar investment and order with rival startup Vertical Aerospace.

eVTOL, or electric vertical take-off and landing aircraft, are a new class of vehicle currently under development. Typically with 5-6 seats, they are anticipated to function as air taxis, and competition is fierce to bring the first model to market.

Despite the announcements from rivals (and despite the fact that Delta owns 49% of Virgin Atlantic), the airline is not ready to commit to anything quite yet.

“We’re studying the space and we will continue to get smart in the space,” Bastian said. “I think it’s at a very early stage right now, and I think a lot of the plans that we’ve seen are a bit premature, candidly.”

More: United will potentially buy up to 100 small electric planes in new soft order

The airline has, however, had discussions with numerous manufacturers.

“It’s hard to predict timing,” Bastian added. “but we’re in the marketplace having lots of conversations.

Featured image by AaronP/Bauer-Griffin/GC Images

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