Delta CEO Says Coronavirus Will Likely Get Worse, Looks To Government For Support

Delta (DAL) CEO Ed Bastian has penned a letter to employees discussing the strategy that the airline will take as it continues to navigate its way through the coronavirus pandemic, including discussions with the White House and Congress on receiving additional government support.

Bastian said in his memo that he is optimistic that the White House and Congress will offer their support during the crisis but said the form of help and the value is “unpredictable.”

While the government may aid Delta and other airlines to help them weather the COVID-19 outbreak as travel continues to dwindle, Bastian maintained that “we can’t put our company’s future at risk waiting on aid from our government.”

Bastian offered encouragement to employees and outlined the steps that Delta would take to put the company in a financial stronghold during the crisis. Bastian said he expects the coronavirus situation to likely get worse and business to further decrease as the airline continues to see ticket sales drop.

“Demand for travel is declining at an accelerated pace daily, driving an unprecedented revenue impact,” Bastian said. “Cancellations are rising dramatically with net bookings now negative for travel over the next four weeks. To put that in perspective, we're currently seeing more cancellations than new bookings over the next month.

“The speed of the demand fall-off is unlike anything we've seen – and we've seen a lot in our business. We are moving quickly to preserve cash and protect our company. And with revenues dropping, we must be focused on taking costs out of our business.”

To preserve cash, Bastian said the company would reduce overall capacity in the next few months by 40%, which is the largest reduction in Delta’s entire flight history, including 9-11 in 2001. The company will also eliminate flights to Europe for the next 30 days, as directed by President Trump in the U.S. travel ban. Flights, however, will continue to London.

As many as 300 aircraft will be parked to match the lower capacity requirements, and new aircraft deliveries will be delayed. Delta will also reduce capital expenditure by $2 billion for the year.

Bastian also said that Delta will undergo a hiring freeze. It will offer voluntary short-term, unpaid leaves and reduce its use of consultants and contractors. Bastian will also not take a salary for the next six months, effective immediately, and said more critical decisions will be made in the coming days.

But Bastian focused on a bright spot in his memo, saying, “Delta remains better-positioned to weather a storm of this magnitude than ever before in our history.

“We've spent a decade building a strong, resilient airline powered by the best professionals in the business. We will get through this, and taking strong, decisive action now will ensure that we are properly positioned to recover our business when customers start to travel again.”