After wave of cancellations, Delta sees recovery in 2022

Business

FILE – A passenger wears a face mask to help prevent the spread of the new coronavirus as he waits for a Delta Airlines flight at Hartsfield-Jackson International Airport in Atlanta on Feb. 18, 2021. Delta Air Lines said Wednesday, Jan. 12, 2022, it will extend through 2023 the window for customers to rebook credits earned when they purchased but then canceled flights during the pandemic. (AP Photo/Charlie Riedel, File)

Delta Air Lines lost $408 million in the final quarter of 2021, dragged down by a COVID-19 surge that rocked the airline in December, and the carrier predicted Thursday that it will suffer one more quarterly loss before travel perks up in spring and summer.

CEO Ed Bastian said 8,000 employees have contracted COVID-19 over the last four weeks. Sick workers and winter storms have led to more than 2,200 cancelled flights since Dec. 24.

Cancellations have dropped sharply in the past few days — Bastian said Delta had only two coronavirus-related cancellations on Wednesday — but the spate of spiked flights cost the airline $75 million and the latest outbreak, caused by the omicron variant of the virus, is expected to push the industry’s recovery back by two months.

“I don’t think we’re going to see a pickup in bookings or travel during January and probably the first part of February,” Bastian said in an interview. “It’s always the weakest part of the year, and it’s going to be that much weaker because of omicron. We need confidence in travel returning once the virus recedes.”

Delta assumes that omicron infections will peak over the next few days and then decline rapidly as they have in South Africa and — more slowly — in the United Kingdom.

Omicron halted a long, slow rise in travel and threw it into reverse. So far in January, the number of people flying in the U.S. is down 20% from the same month in 2019 — worse than the 16% declines in November and December.

Earlier this week, United Airlines CEO Scott Kirby said 3,000 employees have tested positive for COVID-19. On a single day nearly one-third of United’s staff in Newark, New Jersey, called in sick, and the airline has reduced scheduled flights systemwide.

Delta expects to lose money in January and February and for the first quarter as a whole. Revenue this quarter will likely be 72% to 74% of pre-pandemic levels, Delta said, about the same as the fourth quarter. Costs other than fuel will jump about 15% from 2019, and jet fuel is getting pricier too.

However, the Atlanta company expects to return to profitability in March — when spring break could help fill planes, especially if coronavirus infections are falling.

Delta will hire several thousand people this year — including 100 to 200 pilots a month — as it bounces back from the pandemic, Bastian said. The company set aside $108 million for special profit-sharing payments of $1,250 for each current employee.

The thank-you payment to employees comes as a new skirmish breaks out between largely non-union Delta and the nation’s largest union of flight attendants. The union, which has tried unsuccessfully to represent Delta workers, accuses the airline of pressuring employees to return to work too soon after contracting the virus.

Delta lobbied the U.S. Centers for Disease Control and Prevention last month to reduce the recommended quarantine period from 10 days to 5 days for vaccinated people who contract the virus, with Bastian and other Delta officials saying that the 10-day standard may significantly impact our workforce and operations.”

The CDC made the change, with its director, Rochelle Walensky, explaining on NPR that “we started to see challenges with … airline flights and other areas.”

Delta’s fourth-quarter loss compared with a profit of $1.1 billion in the same quarter before the pandemic.

Excluding losses on some investments and profit-sharing, Delta earned $170 million, or 22 cents per share. That easily topped per-share projections on Wall Street of 14 cents, according to a FactSet survey.

Revenue was $9.47 billion, down 17% from $11.44 billion in the fourth quarter of 2019, but well above the $9.02 billion predicted by industry analysts.

Analysts said the results and outlook were in line with expectations that Delta set at an investor event last month.

“They did make money (on an adjusted basis), and Q1 is going to be a loss — not a shock,” said Peter McNally, an analyst at Third Bridge. “Business and international travel are still a long way off, but the outlook is about where we thought it would be.”

Savanthi Syth of Raymond James called the outlook “encouraging.”

Shares of Delta Air Lines Inc. gained 4% in midday trading Thursday. Other leading U.S. airlines rose between 2% and 6%, and other travel stocks including booking sites, hotels and cruise lines also moved higher.

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David Koenig can be reached at www.twitter.com/airlinewriter

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