US major Delta Air Lines sees some green shoots in what is a bleak corporate outlook and although it believes the volume of business travel may never return to 2019 levels, it does not believe the drastic drop off in corporate demand will remain everlasting. However, right now and in the near term, as Covid-19 cases continue their rapid spread throughout the US, corporate travel remains essentially non-existent.
“Business travel, which typically represents 50% of our revenue, has not yet returned in any meaningful way,” said Delta’s CEO Ed Bastian during a recent earning discussion with analysts and investors. But he concluded he is not “one that thinks that we are in a permanently depressed level of business travel for the foreseeable future”.
Still, Delta’s CEO did conclude that there is “a lot of inefficiency in business travel”, noting that the number of trips that the average road warrior takes will, in certain cases, decrease. “The international trips that we’ve all been on where we’ve flown over to Europe for a two hour meeting and flown back, that does nothing but beat you up, and you’d certainly be much easily accommodated over a video call,” Mr Bastian explained.
The nature of business trips going forward, he said, are likely to be focused on relationship building, interacting with customers, conventions, new contacts and reviewing performance on a global scale.
Although most corporations have shut down business travel, some individuals are travelling for business, said Mr Bastian. “…we see it in the SkyMiles data and our frequent flyer information”, he said.
Delta is also making a significant effort to foster confidence amongst corporate clients that air travel is safe. “…what we’ve been doing its taking them out with us on tours and seeing the airport. It is interesting for travellers that have spent their life as road warriors, the first time back in this environment, it feels different,” Mr Bastian noted.
“I’d say the most significant observation that they give us is that is actually not only safe, it’s significantly better than…their view of air travel…pre-pandemic,” he explained. But, even with those slightly encouraging signs, Mr Bastian stated business travel is “going to clearly be a 12 to 18 month lag, awaiting for advances on the medical front”. He concluded that vaccines and other therapeutics will help companies feel comfortable that they can “safely put their employees back on the road”.
Delta has revealed a June quarter 2020 GAAP pre-tax loss of USD7.0 billion on total revenue of USD1.5 billion, an adjusted pre-tax loss of USD3.9 billion on adjusted revenue of USD1.2 billion, illustrating the truly staggering impact of the Covid-19 pandemic on the operator.
Demand for air travel declined significantly in the June quarter, with enplaned passengers down 93% year-on- year. As a result, Delta’s adjusted operating revenue was down 91% percent versus the Jun-2019 quarter. Passenger revenues declined 94% on 85% lower capacity. Non-ticket revenue declined 65% as cargo, MRO and loyalty revenues declined at a lower rate than ticket revenue.