Delta’s Q2 Financial Results Shows $11 Billion Drop in Revenue
1 Remember in April when the Q1 financial statements came out for each airline and we warned that Q2 would be much worse? Well, here we are. Delta Air Lines released its Q2 financials on Tuesday, and it’s not pretty. The airline produced $1.5 billion dollars of operating revenue, a staggering drop of $11 billion from Q2 in 2019. Delta ends June with $15.7 billion in liquidity.
On the… bright side? Delta’s total adjusted operating expense decreased $5.5 billion — or 53% year over year — driven by lower capacity and revenue related expenses and the airline having cut cost throughout its business. The problem is when your revenue drops $11 billion and your costs drop only half that… it’s not going to end well for you.
Delta showed a pre-tax loss of $7 billion and a loss per share of $9.01. That number is so large and so bad that it’s hard to grasp. The airline did reduce its daily cash burn by 70% from March, going from $43 million per day to a mere $27 million per day in June, so it’s got that going for it… which is nice. It expects to be breakeven by the end of the year, though that sounds optimistic.
Southwest Warns of Possible Layoffs
2 With a Wednesday deadline looming for its employees to accept a voluntary buyout offer from the airline, Southwest Airlines CEO Gary Kelly warned staff that layoffs are potentially in the airline’s future for the very first time.
In response to the downturn in demand, Kelly told employees that if passenger demand didn’t triple between now and the end of the calendar year — or if passengers wanted to start paying triple the fare, we assume — the airline would be facing very difficult choices. Famously, Southwest has never been forced to resort to layoffs in the nearly 50-years it’s been flying.
Several states in which Southwest has a significant presence have seen spikes in new cases recently, including Florida and Texas. In a letter to employees, Kelly said, “we are still overstaffed, and COVID cases continue to rise.”
Kelly added that the “recent rise in COVID cases and increasing regional restrictions on businesses and states requiring quarantine aren’t positive developments for our business, and we are concerned about the impact on already weak travel demand.”
Australia Places Cap on Number of Arriving International Passengers
3 Australian Prime Minster Scott Morrison said that his country will cap the number of international arrivals via air at 4,000 per week for the indefinite future.
The hard limit went into effect yesterday, July 13 and is a 50% reduction of the number of international arrivals that had been entering the country in recent weeks. Since March, only Australian citizens, as well as permanent residents and their immediate family members, have been allowed to enter.
The decision comes after three states had imposed their own restrictions in recent days. Victoria had shut down all international arrivals into Melbourne which caused neighboring New South Wales to limit the number of arrivals into Sydney to 50 per flight and 450 per week. Western Australia had capped the numbers of international arrivals into Perth at 75 per day and 525 for the week. It is rumored that Tasmania has capped international arrivals at 1 — a guy named Jerry.
American Gives Basic Economy Passengers Flexibility
4 American Airlines announced that it would offer its basic economy passengers a tiny bit of flexibility for the foreseeable future. Don’t worry, it’s just a little bit — don’t get all crazy and think you’ll be choosing a seat assignment or checking a bag for free.
In a notice to travel agents, the airline disclosed it would allow its current fee-free change waiver to apply to all basic economy tickets issued beginning today. Additionally, any basic economy ticket issued from June 1 to July 13 for travel beyond October 1 can also receive a one-time waiver to change.
As always, a difference in fare may apply. And based on how much you saved by buying basic economy you cheapskate, there’s definitely going to be a fare difference. Probably a big one.
Virgin Atlantic Announces Recapitalization Plan
5 Virgin Atlantic is moving forward with its recapitalization plan we mentioned yesterday, beginning a court-approved process to keep the airline flying.
The plan will provide a refinancing package worth £1.2 billion over the next 18 months in addition to the cost-cutting measures already taken, including savings of £280 million per year and £880 million rephasing and financing of aircraft deliveries over the next five years. When asked for comment, well, ok, we didn’t ask for comment. But we assume that Richard Branson would have said he was busy lounging on his Caribbean island and couldn’t be bothered.
Virgin Atlantic will return to the skies next week, on Monday, July 20. The airline will operate a reduced fleet of 37 twin engine aircraft after it retires its seven 747s and four A332s by the end of Q1 in 2022.
Airline Potpourri
- easyJet pilots have called for a vote of no-confidence for COO Peter Bellow.
- Fiji Airways has extended its suspension of operations through August.
- Interjet has received a $150 million dollar cash infusion
- Kenya Airways resumes operations tomorrow, July 15 with service to two domestic destinations from it Nairobi hub.
- SAA creditors approved the airline’s $600 million turnaround plan so maybe it will eventually actually fly again some day.
- SAS bondholders rejected the airline’s $1.5 billion rescue plan. (Maybe SAS should have called it a turnaround plan instead of a rescue plan.)
- WestJet released its August schedule which includes over 200 daily flights to 48 destinations, including 39 Canadian locations.
Andrew’s Moment of Levity
My doctor told me to be more careful and watch my drinking during quarantine. So now I drink in front of the mirror.