Delta Air Lines announced on Tuesday that they will remove 15 points of system capacity in the current reduced-demand environment. International capacity will be reduced 20-25 percent, while domestic capacity will be reduced by between 10-15 percent.
Today, Delta Air Lines announced that they will reduce system-wide capacity by 15 points due to decreasing demand related to COVID-19. The carrier will reduce international capacity by 20-25% and domestic capacity by between 10-15%. In the Pacific region, which represented 6% of FY 2019 revenue, capacity has been reduced by 65% year-over-year, while Trans-Atlantic service, which represented 15% of FY19 revenue, has seen a year-over-year capacity reduction of 15-20%. In Tuesday’s announcement, Delta’s CEO Ed Bastian said,
“In the weeks since COVID-19 emerged, Delta people have risen to the challenge, taking every possible action to take care of and protect our customers during a stressful time. As the virus has spread, we have seen a decline in demand across all entities, and we are taking decisive action to also protect Delta’s financial position. As a result, we have made the difficult but necessary decision to reduce capacity and are implementing cost reductions and cash flow initiatives across the organization. Over the last 10 years, we’ve transformed Delta by strengthening the balance sheet, diversifying our revenue streams and enhancing operational and financial flexibility. The environment is fluid and trends are changing quickly, but we are well positioned to manage this challenge and are taking actions to ensure that Delta maintains its leadership position and strong financial foundation.”
Delta is also taking measures to reduce expenses including a company-wide hiring freeze, offering voluntary leave options, parking aircraft and evaluating the early retirement of older aircraft. Additionally, the carrier is deferring $500 million in capital expenditures, delaying $500 million in voluntary pension contributions and suspending their share repurchase program. The company maintains an “investment-grade” balance sheet with ready access to capital markets and bank financing. Recently, the airline issued $1 billion of secured aircraft debt at a blended rate of 2.9% and will use the proceeds to fund March 2020 debt maturities. The company’s leverage ratio remains at the low end of their targeted 1.5 to 2.5 times adjusted debt to EBITDAR and expects to close the March quarter with $5 billion in liquidity. Additionally, the carrier has around $20 billion in unencumbered assets, including aircraft valued at $12 billion.
Source: Delta Air Lines