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Airlines

Delta Sets Zero Burn Rate Goal for End of 2020

Delta Sets Zero Burn Rate Goal for End of 2020
Joe Cortez

Delta Air Lines is eager to start flying once more, as they prepare to add 1,000 flights per day in July. The Atlanta-based airline announced their intentions during a virtual annual shareholder meeting in June 2020.

Airlines around the world have been hit hard by the outbreak of the novel Coronavirus. Despite that, Delta Air Lines has a goal to get their daily burn rate to $0 by the end of 2020. The goal was set by airline chief executive Ed Bastian during the annual shareholder meeting call on June 18, 2020.

Liquidity and Cash Preservation Remain Priorities

During the call, Bastian noted that the airline was quick to respond to the decrease in revenue by making aggressive cuts. The company stopped projects not tied to immediate needs, closed Sky Club locations and delayed non-essential maintenance for aircraft. Despite that, the COVID-19 pandemic forced Delta into a $607 million loss in the first quarter of 2020, burning $100 million per day.

With internal cost cutting measures, Bastian told shareholders by reducing “total operating expenses” by over 55 percent, their burn rate has decreased by two-thirds. With sales starting to increase, the carrier is setting their sights on a $0 daily burn rate by 2021.

“We are continuing to make progress on daily cash burn and now expect cash burn for the month of June to be approximately $30 million per day,” Bastian told shareholders, as quoted in a call transcript. “We’re confident in our principal financial goal of reducing average daily cash burn to 0 by the end of this year, which is the most valuable way that we can preserve liquidity.”

Despite the aggressive goals, the airline is still taking aggressive moves to shore up current needs. In addition to the $3.8 billion in funds already received from the CARES Act, the airline will get an additional $1.6 billion by the end of July 2020. In addition, over 40,000 employees accepted a voluntary unpaid leave with the carrier, ranging from as little as 30 days, to as long as one year.

Growth Remains Despite Coronavirus Fears

As the world works to flatten the Coronavirus curve and ultimately stop the spread of disease, Delta is starting to scale up their response once more. When asked about the airline’s growth plans for the rest of the year, Bastian noted that they will aggressively “rebuild and restore” service by the third quarter of 2020.

“We are adding 1,000 flights a day the month of July. And then in August, we expect to add another approximately same amount in incremental, 1,000 flights,” Bastian responded to a question about growth plans. “That would put our domestic capacity down somewhere between 55% and 60% of what our normal schedule is.”

In addition, Delta announced they would be the first U.S. carrier to re-enter the Chinese marketplace. The carrier will restart service to Shanghai from Seattle on June 25, 2020, via Seoul Incheon International Airport (ICN). The flights will run twice per week.

COVID-19 Still Top of Mind

Although preserving liquidity and maintaining profits are key for Delta, the airline is also paying close attention to their COVID-19 response. The company lost 10 employees to the pandemic, while around 500 more have tested positive for the disease.

To keep flyers safe and airplanes clean, the airline created a “Global Cleanliness Division,” a branch of the customer experience department. According to Bastion, the goal of the new group is “Innovating and evolving our already high cleanliness standards.” Through this group, the airline started “electrostatic spraying” of cabins between flights, and is forcing all passengers to wear face masks.

Members of Delta’s line maintenance crew disinfect the surfaces of the cabin including tray tables, seat backs and in-flight entertainment screens, using an electrostatic sprayer on a Boeing 757. Photo courtesy: Delta Air Lines (Chris Rank for Rank Studios)

As a safeguard, Delta will continue to block middle-seat bookings through Sept. 30, 2020, and is capping passenger loads to 60 percent. The goal is to continue to lead cleanliness efforts now and beyond the COVID-19 pandemic.

“We have invested in resources to add new layers of protection throughout the travel journey, keeping spaces clean, giving customers more space and offering safer service on planes, at airports and across our facilities,” Bastian said on the call. “we’re also engaging with partners across the travel ecosystem on these issues.”

For employees, the airline is implementing a plan to offer free COVID-19 testing. Working with the Mayo Clinic, the carrier is testing blood serology for everyone working in Minneapolis, with the goal of testing all 90,000 employees over time.

View Comments (2)

2 Comments

  1. jagat101

    June 22, 2020 at 11:13 am

    After my aborted DL flights to UK and NL mid March, I was hoping to rebook this October. Seems like it ain’t gonna happen. Plan B (domestic) vacay would be the way to go for now..

  2. jonsail

    June 22, 2020 at 9:55 pm

    If US travelers remain unwelcome abroad because of our increasing cover-19 cases, that is going to make it really tough for Delta until we get a vaccine.

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