MIAMI– Delta Air Lines (DL) Chief Executive Officer Ed Bastian joined the members of CNBC’s “Squawk on the Street” this week to discuss the American carrier’s response to the COVID-19/Coronavirus pandemic.
After CNBC reporter Phil LeBeau questioned the severity of Delta’s position starting the second quarter, Bastian emphasized the airline’s main issue: demand.
Delta is currently operating with less than 5 percent of the usual passenger load, with only about 30,000 customers having booked flights. In addition, second-quarter revenues are expected to fall US$11m from last year.
While statistics like these are a hard pill to swallow for airline investors, Bastian clarified that the carrier is still deemed an essential service and will remain in operation.
The carrier also recently announced that it will provide free flights for any healthcare workers traveling to areas affected by the COVID-19 outbreak.
When asked if this might expose other Delta customers, Bastian responded, “The first priority [is] to protect our people, protect our customers in the greatest way possible… we’ve tripled down on sanitation, hygiene, cleanliness, making certain every aircraft we’re on is fogger every day.”
Aside from the ongoing Coronavirus spread, some industry observers, including reporter Carl Quintanilla, are concerned that the reemergence of flu season later this year might create double trouble for Delta.
Bastian responded with a vote of confidence for Delta’s finance department, signaling his belief that Chief Financial Officer Paul Jacobson will amass the necessary funds to keep the airline afloat. In Bastian eyes, preserving cash is the company’s second priority behind safety.
Nevertheless, DL continues to burn through US$100m in cash daily. With the aid of cheaper fuel costs, less capacity, and more employees taking voluntary unpaid leave, DL is confident that it can decrease daily cash expenses to US$50m a day.
The American carrier has also managed to decrease 50% of all operating costs, amounting to approximately US$5b in savings. However, if health conditions fail to improve, many wonder how long DL can survive the constant liquidity drain.
While acknowledging that certain behavioral shifts will occur as a result of the outbreak, Bastian asserts that “the reality is the human spirit wants to engage with fellow humans.” In the end, DL sees the current situation as an opportunity to further distinguish the quality of its services.
“The reality is that you will find customers will come back to quality. And there will be a premium for quality and reliability and the reputation of service excellence, all of which our brand represents,” Bastian highlighted.
According to Bastian, it “could take several years before we’re into our new normal.” In the meantime, Delta is also “taking advantage of the time here to build the business.”
Even with over 600 aircraft grounded and only 10 to 15% of scheduled flights being serviced, the longtime CEO remains optimistic that Delta can continue to grow in the face of adversity.
So far, Delta remains the only major American carrier to have announced first-quarter earnings, reporting revenues of US$8.6b. While results were better than expected, the airline recorded its first quarterly loss in the past five years.