By Kelly Yamanouchi, The Atlanta Journal-Constitution
(CNT) City News And Talk #atlanta-ga
Delta Air Lines booked a net loss of $5.4 billion in the third quarter as the company spent billions on buyouts and early retirement packages to cut its workforce and remove hundreds of airplanes from its fleet.
About 18,000 employees took buyouts or early retirements, and CEO Ed Bastian said he expects administrative staffing, including at Delta’s Atlanta headquarters, to be about 25% smaller.
“Those are long-term charges that we are getting behind us,” said Bastian in an interview with The Atlanta Journal-Constitution.
The moves are expected to help the company reduce how much cash it burns over the long term after air travel plunged because of the coronavirus pandemic. The airline’s operating revenue was $3 billion in the quarter, down from nearly $12.6 billion a year earlier.
Losses narrowed slightly from the second quarter, when Delta reported a $5.7 billion net loss. They represent the airline’s worst quarters since 2008, when it reported a quarterly net loss of $6.4 billion amid a spike in fuel prices.
The loss for the July-to-September quarter included $5.3 billion of restructuring charges including the shrinking of headcount and aircraft count. Atlanta-based Delta also got a $1.3 billion benefit from federal CARES Act stimulus funding.
Excluding those items along with a write-down of its investment in Virgin Atlantic and pension settlement charges, Delta says its adjusted pre-tax quarterly loss was $2.6 billion.
While job cuts so far have been through voluntary departures, there’s still a possibility of furloughs for about 1,700 Delta pilots. Delta management is in discussions with the pilots union to avoid the furloughs, with a deadline of the end of this month. Airlines and labor unions are pushing for another injection of federal stimulus funding to avoid job cuts.
Meanwhile, Delta has raised billions of dollars through debt financing and loans, ending September with $21.6 billion in liquidity, a cushion aimed at lasting through a years-long recovery. Air travel has been slowly returning but is still down more than 60%, according to Transportation Security Administration figures.
Early in the pandemic, Delta was burning through $100 million in cash a day from operations, and has since reduced it to $18 million a day as of September. The airline originally set a goal of reducing it to zero by the end of the year, but Bastian said he expects Delta to still be burning through about $10 million of cash a day in December before getting to break even by spring.
“Most of the cash burn we have left in the business really relates to international (flights), which is really where the major losses are still residing, given the restrictions around flying internationally,” Bastian said.
With just a fraction of pre-pandemic customers buying airline tickets, Delta is retiring 383 of its airplanes by the end of 2025 — about 30% of its fleet — including 200 planes this year. Bastian said the airline will also push orders for new Airbus aircraft and regional jets to later years, reducing costs to buy aircraft by $2 billion this year and by more than $5 billion through 2022.
Delta was required to maintain service to most of the airports in its route network through Sept. 30 as part of the CARES Act funding it received.
But with that restriction now expired, Delta is also cutting more flights.
“Right now it’s a modest amount, but we are continuing to analyze the service to the small communities,” Bastian said.
Delta originally got $5.4 billion in CARES Act funding, but received an additional $157 million on top of that in the third quarter, along with a $210 million increase in its low-interest loan from the federal stimulus.