Delta Reduces Cash Consumption by Nearly 50% Aiming for a Spring to Balance

On December 3, Ed Bastian, CEO of Delta Air Lines, sent a far-reaching memo to his staff around the world. In it, the airline expanded its testing program for employees while also offering a vision to help the airline navigate the crisis as it approaches vaccine distribution. One of the biggest details was that the airline had cut its cash usage from Q3 to Q4 by up to 50%.

Delta’s fourth quarter cash consumption

Delta Air Lines expects daily cash consumption in the fourth quarter to be between $ 12 million and $ 14 million per day. That’s up to 50% less than the $ 24 million per day recorded in the third quarter. The carrier noted that slowing demand and forward bookings amid the ongoing crisis had pushed up the carrier’s daily cash consumption by about $ 2 million per day. Although still high, Delta’s cash consumption is expected to be just under half of what Americans expect its average daily cash consumption in the fourth quarter to be.

The airline continues to aim for a breakeven point by spring, and CEO Ed Bastian has highlighted recent developments with a vaccine as a reason to be encouraged.

The airline is trying to get more people on its plane again. This includes new tests without quarantine for flights to the Netherlands and Rome. It is also looking into cargo operations as it prepares to ship the vaccine once it hits the market. It has also embarked on a contact tracing option for international passengers.

Delta CEO is optimistic about vaccine

In the note, Mr. Bastian explicitly stated the following:

“Although it will take months for a vaccine to be widely distributed, it is a clear sign of light at the end of the tunnel. Widespread vaccinations among our customers and employees will be critical to Delta’s sustainable recovery and the start of our rebound. “

While we haven’t said Delta will mandate vaccinations for all customers, as Qantas has previously reported, this is part of Mr. Bastian’s efforts to encourage people to get a vaccine once it hits the market. .

In the meantime, the airline continues to work with the Mayo Clinic to ensure a safe travel experience. The airline is now expanding its testing capacity to allow people to test for the virus weekly. Its partners at the Mayo Clinic told the airline that the viral spread could be reduced by 90% if Delta moved to weekly tests, as it would help reduce asymptomatic transmission. Delta will do this by developing the rapid tests on site; it will provide workplace testing kits with smaller employee populations and will offer home testing kits to all U.S. employees.

Vaccines are not the solution to the air crisis. They are part of the solution to travel. Most airlines and countries have yet to say how or to what extent they would require pre-travel vaccinations, or even whether vaccinations would open up travel. However, there are still a few months before discussions on this subject become necessary.

And the middle seats blocked?

Delta Air Lines is blocking middle seat selection on planes. On jets with middle seats, the airline will block the selection of the middle seats in Premium Select, Comfort + and Main Cabin. However, parties of three or more can still select seats together.

On jets without middle seats, Delta will block the selection of a seat lane on small aircraft. In first class, Delta blocked the adjacent seats. However, the airline does not block any seats in the two-aisle Delta One cabins. This only applies to large bodies. This has an impact on the Airbus A330, A350 and Boeing 767 fleets.

Blocked middle seats cost an airline, but not directly. Blocking seats means fewer seats available for sale, which means less revenue if the price is kept constant. To compensate, Delta would have to increase its prices, which it has done on some routes compared to the competition, but not all.

Southwest Airlines, which ended its policy of blocking middle seats, said it expected to incur $ 100 million in costs related to the policy, mostly in the form of lost revenue.

Delta has relaxed its policies in recent months. The carrier is offering more of its seats for reservation, especially in the lucrative business class cabin. Delta has pledged to block seats until early 2021, although it is not clear whether it will expand its policy beyond that date. The carrier still has hundreds of parked planes that it can put into service to improve certain routes or add new flights to meet growing demand, but even that has a breaking point, as these new flights may not be optimized for the connections people want to take.

For now, Delta seems convinced it can break even with stranded middle seats. However, it is highly unlikely to make a profit until the airline fills all, or at least more than 70-75% of its planes.

Are you happy to see that Delta’s fourth quarter cash consumption rate is down from the third quarter? When do you think the airline will stop blocking the middle seats? Let us know in the comments!