Delta considers early MD-88, MD-90 retirements as possible coronavirus response
It is probably tense times in the executive suite at Delta Air Lines' campus on the north side of the Atlanta airport. The spreading coronavirus outbreak poses the most significant threat yet to the decade-long expansion at U.S. carriers, with travelers and investors alike looking to the likes of Delta for a sign of things to come.
Paul Jacobson, chief financial officer of Delta, spoke to investors at the Raymond James Institutional Investors conference on Monday on the airline's plans if the spreading outbreak takes a bite out of travel demand for an extended period. First up: retire older jets, namely the airline's fleet of McDonnell Douglas MD-88s and MD-90s, early.
"We believe it is too early to sound... alarm bells," wrote Raymond James analyst Savanthi Syth in a report Tuesday on Jacobson's comments. "Delta indicated willingness to retire early its MD-88s, MD-90s, and possibly some older [Boeing] 757s/767s."
Sign up for the free daily TPG newsletter for more airline news!
At the end of December, Delta operated 116 757s, 77 767s, 47 MD-88s and 30 MD-90s, its latest fleet plan shows. It currently plans to retire the MD-88s this year, and the MD-90s in 2022.
Delta has no timeline to retire either the 757 or 767, which it has yet to identify a replacement for.
The potential fleet changes come as all eyes are on the airline industry to see if Americans stop traveling amid fears of the coronavirus-family disease COVID-19. Since the end of last week, Delta is seeing a "notable" decline in domestic bookings but not a "dramatic" decline, Syth wrote about Jacobson's presentation.
Related: Could the coronavirus end the decade-long U.S. airline expansion?
Many fear a more drastic drop in domestic travel demand following blanket travel waivers from Alaska Airlines and JetBlue Airways last week, and more limited ones from American Airlines and Delta since the weekend. In addition, Hawaiian Airlines and United Airlines both cancelled their investor days scheduled for early March. United said they could not have a "a productive conversation focused on its long-term strategy" in the current environment.
Many flights across the globe have been cancelled due to the outbreak. One European airline executive told The Air Current on Saturday that they had seen minimal commercial impact from COVID-19 until last week, when demand fell off a "cliff."
Travelers concerned that their flights might be canceled in the fallout from COVID-19 will benefit from the peace of mind offered in the latest change-fee waivers from some airlines for domestic flights. But if demand remains low going into the summer, airlines could take advantage of their more drastic options -- like the possibility of Delta accelerating the retirement of its MD-88s and MD-90s -- and cut growth plans.
Related:The 10 longest (and 10 shortest) Delta Air Lines flights
Travelers concerned about their travel plans -- but not COVID-19 -- will, in all likelihood, benefit from airline waivers to change or cancel their flights if U.S. travel demand does fall off. That said, if demand remains low going into the summer, airlines will likely take advantage of their more drastic options -- like Delta accelerating the retirement of its MD-88s and MD-90s -- and cut growth plans.
Syth reiterated what other Wall Street analysts -- not to mention public health experts -- keep saying about the impact of the COVID-19 outbreak: "It will get worse before it gets better."
Related: American and Delta issue wide-ranging waivers, carriers announce more cuts
TPG featured card
at Bilt's secure site
Terms & restrictions apply. See rates & fees.
| 1X | Choose to earn up to 1X points on rent and mortgage payments with no transaction fee |
| 2X | Earn 2X points + the option to earn 4% back in Bilt Cash on everyday purchases |
Pros
- Choice to earn up to 1 Bilt Point per dollar spent on rent and mortgage payments
- Elevated everyday earnings with both Bilt Points and the option to earn Bilt Cash
- $400 Bilt Travel Portal hotel credit per year (up to $200 biannually)
- $200 Bilt Cash annually
- Priority Pass membership
- No foreign transaction fees
Cons
- Moderate annual fee
- Designed primarily for members seeking a premium, all-in-one card
- Earn points on housing with no transaction fee
- Choose to earn 4% back in Bilt Cash on everyday spend. Use Bilt Cash to unlock point earnings on rent and mortgage payments with no transaction fee, up to 1X.
- 2X points on everyday spend
- $400 Bilt Travel Hotel credit. Applied twice a year, as $200 statement credits, for qualifying Bilt Travel Portal hotel bookings.
- $200 Bilt Cash (awarded annually). At the end of each calendar year, any Bilt Cash balance over $100 will expire.
- Welcome bonus (subject to approval): 50,000 Bilt Points + Gold Status after spending $4,000 on everyday purchases in the first 90 days + $300 of Bilt Cash.
- Priority Pass ($469/year value). See Guide to Benefits.
- Bilt Point redemptions include airlines, hotels, future rent and mortgage payments, Lyft rides, statement credits, student loan balances, a down payment on a home, and more.