Delta boss upbeat about US demand recovery

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July 15, 2021
Delta
Photo: Chris Rank/ Rank Studios

Delta Air Lines reported a second-quarter profit of $652 million as domestic leisure travel recovered to 2019 levels and it recuperated from the devasting impact of the COVID-19 pandemic.

Delta’s profit, the first for five quarters, was boosted by $US1.5 billion in government payroll aid and translated to an $US881 million pre-tax loss when this was excluded.

Revenue was down 49 percent versus the June 2019 quarter but the airline posted a 76 percent rise compared to the March quarter to hit $US6.3 billion.

READ: COVID pricing helps Delta fleet renewal.

The result surpassed analysts’ expectations and Delta chief executive Ed Bastian was bullish about the carrier’s prospects, noting momentum continued in July and domestic leisure demand and yields were above 2019 June quarter levels.

There were also “clear signs of business in international demand recovery heading into the fall”.

“With June profitability in the books we’re now in the restoration phase of recovery and focused on harnessing the power of our differentiated brand and our resilient competitive advantages to drive sustainable profitability in the second half of 2021, and enable long-term value creation,’’ he told analysts.

“Specifically, for the September quarter we expect a mid-single-digit pre-tax margin as demand continues to improve with the return of corporate travel and gradual reopening of international markets.

“We are starting to see signs of a resurgence of business in international travel both of which are supporting the next leg of the revenue recovery.

“And we’re well positioned to take advantage of both with leading domestic corporate chair and a strong global network.”

Bastian said the sentiment in the airline’s most recent corporate survey indicated 95 percent of its accounts would return to offices by the end of the year.

“Domestic corporate volume grew from (a) 20 percent base in March of this year, the March month that is, to 40 percent recovered in the June month.

“And we expect it to be close to 60 percent recovered by September based largely on these reopenings.”

The Delta CEO was also encouraged by the strength Delta was seeing in international travel.

While he acknowledged international demand recovery would be “choppy and uneven”, Delta was seeing strong bookings to Europe when countries opened their borders.

“From our experience in the U.S. we’re seeing the impact that widespread vaccinations have on reopening the economy,’’ Bastian said.

“We know the same will be true for the rest of the world over time but are mindful of the risks that new variants posed to the pace of recovery and our team will stay very disciplined in restoring international capacity.

“As the recovery builds steam, we are making the required investments including hiring frontline and reservations employees, in investing ahead of the full recovery of the airline in places like maintenance and training.

“This will allow us to continue to provide industry leading service levels and prepare the airline for success in a stronger than previously expected demand environment.”