Delta to ground half its fleet as it winds down majority of its operation
Delta Air Lines will ground more than 600 aircraft in its latest round of cuts that will see the carrier flying less than third of its expected schedule as the coronavirus crisis worsens.
The SkyTeam Alliance carrier will cut system capacity by 70%, with international reduced by more than 80%, over the next several months. Delta CEO Ed Bastian detailed the moves in a Wednesday memo to employees that was titled "Protecting Delta's Future."
"Following the national emergency that was declared by the U.S. president, demand for travel has dropped significantly," said Bastian. "Revenue for the month of March is now expected to decline by almost $2 billion over last year, with our projection for April falling even more."
As part of the reductions, Delta will park more than 600 aircraft from its active fleet that stood at 1,340 jets — including those operated by regional affiliates — at the end of December. This will include the early retirement of its remaining McDonnell Douglas MD-88s and MD-90s, as well as some Boeing 767s.
Delta's cuts represent what is essentially a wind down of one of the largest airlines on the globe. The carrier will consolidate operations at its Atlanta base — currently the largest hub in the world — and at other airports. It also will shutter many of its premium lounges globally.
And, in a testament to how fast fears of COVID-19 are impacting airlines, Delta planned what was then an "unprecedented" 40% system capacity reduction just five days ago.
No U.S. carrier has pulled down capacity as much as the latest plan from Delta calls for. American Airlines has cut international capacity by 75% and domestic by up to 30%, though many expect it to make further reductions. And United Airlines has reduced system capacity by 60%.
TPG understands that, even with the latest cuts, demand for air travel continues to fall faster than the U.S. carriers' capacity reductions.
On Monday, Airlines for America (A4A), the industry organization representing U.S. carriers in Washington, asked the government for at least $50 billion in aid to get the industry through the crisis. President Donald Trump has, in comments since, indicated that the government will provide financial support to airlines.
"[We] remain optimistic that our industry will receive support to help address this crisis," said Bastian Wednesday. "That said, we have to continue to take all necessary self-help measures. Cash preservation remains our top financial priority right now."
Delta has already taken a number of moves to preserve cash. The airline has stopped new aircraft deliveries and nearly all capital investments, Bastian has foregone his salary, and more than 10,000 of its roughly 91,000 employees have take voluntary unpaid leave.
The International Air Transport Association (IATA) has called on global governments to support airlines through the current cash crunch. The organization warns that more and three-quarters of airlines globally do not have enough cash to last three months.
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