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Delta Air Lines retires more jets amid shaky outlook, nearly $6B quarterly loss

July 14, 2020
6 min read
Delta Air Lines retires more jets amid shaky outlook, nearly $6B quarterly loss
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Delta Air Lines is moving forward with efforts to cut costs, retiring more jets fresh off a nearly $6 billion loss during the second quarter.

The Atlanta-based carrier will retire its 10 Boeing 737-700s, as well as some of its 62 Airbus A320s and 56 Boeing 767-300ERs in a long-term cost savings effort, Delta said on Tuesday. This is on top of the Boeing 777s and McDonnell Douglas MD-88s and MD-90s that it has already retired.

"In this environment, we need to resize our business and build resilience to create a new, stronger Delta," Delta chief financial officer Paul Jacobson told staff in a memo Tuesday viewed by TPG. "That means streamlining our company, simplifying our fleet and reducing our fixed cost base in ways not feasible in the past."

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More from Delta's Q2 earnings: Delta says air travel recovery has stalled, hopes more flyers return by end of summer

The fleet moves come after a grim three months for Delta. The airline saw operating revenues plummet by more than $11 billion, or 88%, year-over-year to $1.5 billion during the quarter ending in June. However, expenses only fell 40% to $6.3 billion.

Delta reported a $5.7 billion net loss during the period. While not unexpected — and likely just the first of steep airline industry losses — it is a dramatic reversal from its $1.4 billion net profit during the three months ending in June 2019.

Jacobson was not optimistic about the outlook for the current quarter that ends in September. The airline was losing $27 million a day in June that, while a significant improvement over past months, is still a sizable sum. At the same time, rising coronavirus case numbers and new travel restrictions have hit July and August hard, with Jacobson saying new bookings have declined in recent weeks.

"Increased bookings are key to achieving our goal of breaking even on a cash basis by the end of the year, and we’re working to manage that volatility through tight management of our capacity and costs," he said.

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Related: Delta likely to pull flights as number of US coronavirus cases rises

Delta's staff also face the impending likelihood of furloughs or layoffs come October. CEO Ed Bastian told the Financial Times on Tuesday that, with more than 15,000 staff taking voluntary exit packages by July 13, the number of involuntary departures "will be much smaller than the numbers at United or American."

The carrier has already sent notices of possible involuntary furloughs to more than 2,500 pilots. Similar notices could still be sent to other members of its workforce with federal rules only requiring at least 60 days notice, or by the beginning of August.

United Airlines has warned 36,000 staff of possible furloughs, and American Airlines has told staff that they could have as many as 8,000 flight attendants more than they need by the end of the year.

Related: United Airlines may furlough up to 36,000 staff as coronavirus forces drastic cuts

Delta accepted $5.4 billion in payroll assistance from the federal government's coronavirus aid package, or CARES Act, in April. The funds came with rules that barred the airline from letting staff go, as well as from suspending flights to most U.S. cities, until after Sept. 30.

In addition, the airline is evaluating taking another $4.6 billion in general loans from the CARES Act.

Delta's management team will present their second quarter earnings and discuss the carrier's outlook later on Tuesday.

Related: State-by-state guide to coronavirus reopening

Featured image by Alberto Riva

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TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
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10XEarn unlimited 10X miles on hotels and rental cars booked through Capital One Travel
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Why We Chose It

The Capital One Venture X card is one of the best all-round travel credit cards ever launched. Not only is it offering a tremendous welcome bonus, but cardholders can earn tons of miles on everyday spending and receive a 10,000-mile anniversary bonus to boot. Its annual fee is $395, but cardholders can count on up to $300 in statement credits toward travel booked through Capital One Travel each year and other valuable benefits like access to Priority Pass lounges and Capital One’s own growing family of airport lounges.

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  • Excellent welcome offer worth 75,000 miles after you spend $4,000 on purchases in the first three months.
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  • 10,000 bonus miles (worth $100 toward travel) each account anniversary.

Cons

  • The $395 annual fee might be expensive for some, but this card’s benefits provide much more value than that.
  • If you don’t travel frequently, this might not be the best card for you.
  • Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel
  • Receive up to $300 back annually as statement credits for bookings through Capital One Travel, where you'll get Capital One's best prices on thousands of options
  • Get 10,000 bonus miles (equal to $100 towards travel) every year, starting on your first anniversary
  • Earn unlimited 10X miles on hotels and rental cars booked through Capital One Travel and 5X miles on flights booked through Capital One Travel
  • Earn unlimited 2X miles on all other purchases
  • Unlimited complimentary access for you and two guests to 1,400+ lounges, including Capital One Lounges and our Partner Lounge Network
  • Receive up to a $100 credit for Global Entry or TSA PreCheck®
  • Use your Venture X miles to easily cover travel expenses, including flights, hotels, rental cars and more—you can even transfer your miles to your choice of 15+ travel loyalty programs
  • Named editors' choice for "Best New Credit Card of 2021" by The Points Guy
  • Earn 10 miles per dollar when you book on Turo, the world's largest car sharing marketplace, through May 16, 2023