Delta Air Lines, eyeing continued recovery from the pandemic, sees business travel on the mend and high demand for Europe next spring and summer. Despite that optimism, however, the Atlanta-based carrier said rising fuel prices would prevent it from earning a profit in the current quarter.
Delta on Wednesday became the first airline to report third quarter earnings, saying it made an adjusted pretax profit of $216 million. CEO Ed Bastian, speaking to reporters last week in Boston, said then that Delta would likely be the only major U.S. airline with a third-quarter profit.
Delta’s ticket sales last week rose 9% from the previous week and domestic business travel reached 50% of pre-pandemic levels, Bastian said Wednesday on Delta’s earnings call. “We anticipate a meaningful acceleration in business travel,” he said. “There will be a mad rush (by) those that need to travel.”
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As for international travel, he said that in the spring and summer of 2022, Europe will see growth “like we’ve just been through here in the U.S,” during a summer of heavy domestic travel. He cited high expectations for Paris in January and February, with “spring and summer even higher.”
Overall, “We have the ability to achieve 2019 capacity levels by the second half of next year,” Bastian said.
Delta continues to do things its own way. It has not joined other airlines in setting a date when unvaccinated employees will be fired. Rather, Bastian said, “The goal is to get people vaccinated (and) we are on a plan to get people vaccinated. The (Biden) administration was uncomfortable that not enough had plans, (but) we have a plan and the plan’s working well.”
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Bastian expects that 95% of employees will be vaccinated “as we get into November.” He added, “There will be some exemptions, a small number not vaccinated, in the one to two percent range. We’ll have to assess that when the time comes.”
Additionally, Bastian said Delta continues “to see ourselves as the premium provider of service in our country.” A revelation during the pandemic was continued high demand for premium products such as Delta Comfort. Citing “high-end leisure demand,” Delta President Glen Hauenstein said, “the big epiphany for us was that there’s a much higher demand for (premium products) than just business travel.”
Hauenstein said Delta continues to add a new premium economy class in its long-haul international aircraft. The product is “better than domestic first class,” he said. With many widebody aircraft either sitting in the desert or being used on domestic routes such as Atlanta-Salt Lake City, Delta is seeing higher costs, losing the benefit of lower cost per available seat mile that comes with flying widebody aircraft on long routes. But on the plus side, it is upgrading the seats on the aircraft that are sitting in the desert.
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Premium-oriented Delta also continues to benefit from maintaining an empty middle seat from the start of the pandemic until May 1, 2021, months past the date when other airlines ended the policy — if they ever started it. “We did get an advantage” during a time when “customers required an additional measure of confidence,” Bastian said last week in Boston.
Additionally, Delta surprised the industry this month when it became the largest airline by departures at Boston Logan, surpassing longtime leader JetBlue. In October, Delta will have 3,140 Logan departures, compared to 3,074 for JetBlue and 2,016 for American, according to Cirium. JetBlue led as recently as September.
On the call, Hauenstein said, “We were clear about our intentions to be Boston’s preferred airline pre-pandemic.”
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“We saw some opportunities in the pandemic (including) a relatively robust demand set to Europe,” Hauenstein added. “We wanted to fill out international markets from Boston. It really is a winning hand for Boston.” Hauenstein declined to comment on whether Delta growth in Boston would ease the legal path for American and JetBlue, who are contesting a Justice Department suit alleging that they would reduce competition by providing codeshare flights in Boston and New York.
Hauenstein also referred obliquely to the problems that plagued Southwest during the past few days, as that airline cancelled thousands of flights after poor weather and air traffic control delays exposed flaws in its crew scheduling and ability to recover from schedule disruptions.
Hauenstein said Delta cannot get bigger right now, “without risking operational performance issues like you’ve seen at some of the other carriers.”
Featured photo by Robert Smith/MI News/NurPhoto via Getty Images.
