Delta cuts global capacity by at least 15% on coronavirus impact

Mar 10, 2020

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Delta Air Lines is cutting global capacity by at least 15% following a drop of more than a quarter in bookings worldwide due to fears of the novel coronavirus.

The SkyTeam Alliance carrier will make the most drastic reductions across the Pacific where capacity will be cut by roughly 65% year-over-year, Delta said in an investor presentation Tuesday. Transatlantic capacity will be reduced by 15-20%, domestic capacity by 10-15%, and Latin America capacity by roughly 5%.

Delta did not provide a timeline for the cuts, though it did say that it was “prepared to take more aggressive actions” through the summer.

Related: Coronavirus-related U.S. airline flight suspensions and waivers

(Image courtesy of Delta Air Lines)

 

“This clearly is not an economic event,” said Delta CEO Ed Bastian at the J.P. Morgan Industrials Conference Tuesday. “This is a fear event probably more akin to what we saw at 9/11.”

Traveler fear of the COVID-19 outbreak has prompted airlines around the world to slash flights and parking jets. American Airlines, JetBlue Airways, Spirit Airlines and United Airlines have all made U.S. domestic capacity reductions, while Lufthansa and Qantas Airways have said they will park some — or all — of their Airbus A380 superjumbo jets.

Airlines are making the capacity cuts, and subsequent fleet reductions, to preserve cash as they see bookings plummet amid fears of the virus.

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Net bookings at Delta have fallen by 25-30% since the last week of February, said Bastian. This month, the load factor — or the percent of seats that are full — on the airline’s flights is forecast at only 65-70%, a 20 point drop from March 2019.

“As we learned in 2009, the demand drop will be sharp but so will the recovery,” he said. However, Bastian added that Delta is taking a conservative approach to what he described as a still “fluid” situation.

In conjunction with Delta’s planned capacity cuts, the airline will temporarily park both narrow-body and wide-body jets. It is also considering retiring older aircraft — potentially including its McDonnell Douglas MD-88s and MD-90s — early if the impact of COVID-19 are drawn out.

Related: US airline execs warn coronavirus impact ‘could be worse than 9/11’ downturn

The carrier has also suspended share repurchases and hiring until it has a better sense of the duration of the demand slowdown, said Delta chief financial officer Paul Jacobson.

Delta is allowing passengers booked on flights through April 30 a fee-free, one-time itinerary change.

Featured image by Alberto Riva/TPG.

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