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Delta slashing capacity 40% ("the largest capacity reduction in Delta's history)

Delta slashing capacity 40% ("the largest capacity reduction in Delta's history)

Old Mar 13, 20, 11:17 am
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Delta slashing capacity 40% ("the largest capacity reduction in Delta's history)

Here's a memo Ed Bastian sent to Delta employees today about the current state of affairs. In his note he mentions the "elimination" of travel to mainland Europe. Curious if that is a complete elimination, or the drastic reductions already mentioned...

Earlier this week, I updated you on the steps we are taking to protect our people, our customers and our business amid the COVID-19 (coronavirus) outbreak. In just the few days since, the situation has worsened considerably, with large public events cancelled, businesses suspending travel, and popular destinations facing heightened government travel restrictions, including a 30-day ban to continental Europe announced Wednesday night.

Demand for travel is declining at an accelerated pace daily, driving an unprecedented revenue impact. 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.

In order to do this, we are taking difficult but determined actions to protect the financial position of the company. These include:
  • An overall capacity reduction in the next few months of 40 percent – the largest capacity reduction in Delta’s history, including 2001.
  • Elimination of flying to continental Europe for the next 30 days, which could be extended. We will maintain service to London.
  • Parking up to 300 aircraft as our reduced capacity requires a substantially smaller fleet.
  • Deferring new aircraft deliveries to manage our reduced capacity and preserve cash.
  • Reducing capital expenditures by at least $2 billion for the year, including delaying aircraft mods, IT initiatives and other opportunities to preserve cash.
  • Immediately offering voluntary short-term, unpaid leaves as well as an immediate hiring freeze.
  • Substantially reducing the use of consultants and contractors.


We’ll be making more critical decisions on our response in days to come. The situation is fluid and likely to be getting worse. But what hasn’t changed is this: 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.

In coming days and weeks, every one of us will have an opportunity to contribute to Delta’s durability. That ranges from considering a voluntary leave that works for you and your family, to identifying opportunities to save money in your division or department, to volunteering for the Peach Corps to help our customers and colleagues at the airport. I ask all of you to see what you can do to help us save cash.

In light of these developments, I’m foregoing 100 percent of my salary, effective immediately, for the next six months.

We are in discussions with the White House and Congress regarding the support they can provide to help us through this period. I’m optimistic we will receive their support. That said, the form and value is unpredictable, and we can’t put our company’s future at risk waiting on aid from our government.

Above all, nothing is more important than the care, safety and health of our customers and each other. That includes the many steps we are taking to keep our planes and facilities clean and disinfected, as well as our never-ending commitment to flight safety even among these distractions. We need to assure our customers it is safe to fly in all respects, now more than ever. We also understand the need for social distancing as a means to protect our customers and each other, and we encourage all of our people to be mindful of every opportunity to reduce the risk of transmission at work and in your daily lives. This is a severe crisis.

I know many of the newer members of the Delta family have never experienced this level of uncertainty in our business. Your veteran colleagues will tell you that we have been through turbulent times before, and what has always carried us through has been our commitment to our values, our culture and each other. I am confident that we will emerge from this crisis as a strong, trusted global brand that truly connects the world like no other. And we will be stronger for having gone through this experience.

I continue to be honored and humbled to lead this team. I will give you another update early next week. Thank you for all that you are doing, and will continue to do in the days ahead, to care for the Delta family and our customers.

Ed
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Old Mar 13, 20, 11:23 am
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Quite the note (are you authorized to post it?).

The response seems completely reasonable. Delta is well run, and this note is an indication of that. They're doing all the right things to prepare for what could be the worst year for aviation since WW2.
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Old Mar 13, 20, 11:24 am
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Wow, even though it has hardly any impact on their bottom line, him taking 6 months of no pay is a nice gesture.

Still trying to figure out if my flight to Dublin next week will be ok. Only says London is a go, but continental Europe is a no go.
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Old Mar 13, 20, 11:26 am
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Originally Posted by JTE458 View Post
Wow, even though it has hardly any impact on their bottom line, him taking 6 months of no pay is a nice gesture.

Still trying to figure out if my flight to Dublin next week will be ok. Only says London is a go, but continental Europe is a no go.
Yeah, I'm wondering about DUB and KEF both. Guess we'll have to see where things land when flights are loaded.
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Old Mar 13, 20, 11:29 am
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Booked a trip to BOS from TPA and the TPA-ATL segment is showing an MD-88 for 4-4-20.

Been in the area 2 years and never seen an MD at any gates. Maybe it’s a mistake and will be corrected.
seems crazy to fly such an old fuel inefficient plane when a gazillion planes are planning on being parked.

Last edited by apodo77; Mar 13, 20 at 3:25 pm
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Old Mar 13, 20, 11:32 am
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I am busy booking flights as the fares are stupid cheap right now. Am I the only one doing this?

I can work from anywhere in the world - This is like the chance of a lifetime for me.
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Old Mar 13, 20, 11:33 am
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We are in discussions with the White House and Congress regarding the support they can provide to help us through this period. I’m optimistic we will receive their support. That said, the form and value is unpredictable, and we can’t put our company’s future at risk waiting on aid from our government.
Summary: We're looking at government subsidies.
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Old Mar 13, 20, 11:35 am
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Got a few cancellations (SDQ-JFK) as the mornin flight got axed. Availability in many routes is evaporating.
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Old Mar 13, 20, 11:35 am
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Originally Posted by FlyingBeanCounter View Post
I am busy booking flights as the fares are stupid cheap right now. Am I the only one doing this?

I can work from anywhere in the world - This is like the chance of a lifetime for me.

Now you can spend the next few weeks sorting out all of your cancellations
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Old Mar 13, 20, 12:00 pm
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Originally Posted by FlyingBeanCounter View Post
I am busy booking flights as the fares are stupid cheap right now. Am I the only one doing this?

I can work from anywhere in the world - This is like the chance of a lifetime for me.
Everyone can make their own choices but every person who is in proximity to any stranger in the near future is a chance for the virus to spread.

Not to mention that in the near future there is an increasingly high risk of getting stuck places due to flight cancellations/restrictions, and a risk that the places where you travel to may rapidly become less pleasant places to be -- not just because of sickness but also because many locations have already taken steps of closing all restaurants/bars and other non-essential businesses.
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Old Mar 13, 20, 12:01 pm
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Originally Posted by apodo77 View Post
Booked a trip to BOS from TPA and the TPA-ATL segment is showing an MD-88 for 4-4-20.

Been in the area 2 years and never seen an MD at any gates. Maybe it’s a mistake and will be corrected.
It would make sense to run planes like the MD-88's with lower costs right now. They are paid for and the pilots have a cheaper pay rate.
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Old Mar 13, 20, 12:03 pm
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Originally Posted by readywhenyouare View Post
It would make sense to run planes like the MD-88's with lower costs right now. They are paid for and the pilots have a cheaper pay rate.
Delta doesn't have a choice, short of Ch 11, to stop paying the financing payments for newer aircraft, so they might as well run newer aircraft that are more fuel efficient and have lower maintenance costs and park the older ones (this is offset somewhat by the fact that most of their newer aircraft are also bigger, but I imagine it still works out in favor of the newer aircraft). In the short term the ownership cost of their fleet is a fixed cost, but the cost incurred by operating each flight is up to the choice of which aircraft stay in the air.
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Old Mar 13, 20, 12:11 pm
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Originally Posted by bgriff View Post
Delta doesn't have a choice, short of Ch 11, to stop paying the financing payments for newer aircraft, so they might as well run newer aircraft that are more fuel efficient and have lower maintenance costs and park the older ones (this is offset somewhat by the fact that most of their newer aircraft are also bigger, but I imagine it still works out in favor of the newer aircraft). In the short term the ownership cost of their fleet is a fixed cost, but the cost incurred by operating each flight is up to the choice of which aircraft stay in the air.
It doesn't work like that. NWA returned a lot of newer aircraft in bankruptcy and kept the DC-9's that were paid for flying. Delta will burn through cash very quickly at this point. It's not a good situation at all and I would not be surprised to see another bankruptcy. Delta can bring back MD-88's and -90's from storage and return newer aircraft and reject any new orders.
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Old Mar 13, 20, 12:11 pm
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I wonder what's going to happen to the low margin coastal hubs. The schedule update this weekend might be substantial.
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Old Mar 13, 20, 12:15 pm
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Originally Posted by bgriff View Post
Delta doesn't have a choice, short of Ch 11, to stop paying the financing payments for newer aircraft, so they might as well run newer aircraft that are more fuel efficient and have lower maintenance costs and park the older ones (this is offset somewhat by the fact that most of their newer aircraft are also bigger, but I imagine it still works out in favor of the newer aircraft). In the short term the ownership cost of their fleet is a fixed cost, but the cost incurred by operating each flight is up to the choice of which aircraft stay in the air.
Not sure how long it takes for the price of oil to work its way through to the price of jet fuel, but with oil having crashed, the smartest move is to run the MD-88s, especially with DL's strategy to use every ounce of life in a a/c. A/c have a life of only so many hours/cycles - you might as well use up the life of gas guzzlers while fuel is cheap rather when it bounces back. Ya, its more expensive to use this strategy in the short term, but it will be much cheaper overall in the long term.
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