Delta Air Lines jets are seen on a taxiway at Hartsfield-Jackson Atlanta International Airport in Atlanta, Georgia, United States, December 22, 2021.
Elie Nouvelage | Reuters
For Delta Air Lines, the Covid situation is not as bleak as it could be. Its outlook released Thursday along with its fourth quarter 2021 earnings report forecast profit of around $400 million for the second half of this year, and its CEO Ed Bastian noted that this would make Delta “the only major airline American to reach the second half”. profitability.”
Delta still expects to lose money in the first quarter, but the first quarter will be the only loss-making quarter of 2022. ‘accelerates in spring and summer,’ Bastian said on the profit call.
Investors are more confident now than they were in the spring of 2020 about the airline industry, and Delta feels good enough — even in a difficult public health and staffing environment — to have announced a special payout. profit sharing for all global employees. paid on February 14, $1,250.
Delta said there was a silver lining in omicron hitting during what is typically a lighter season for bookings and by the time this Covid wave passes – if it progresses as expected faster than previous waves – there will be plenty of time for leisure travelers who have delayed summer plans to still book vacations.
Business travel, however, is another story, but Delta doesn’t see the “death of business travel” — predicted by many at many points in the pandemic — as being more likely now, even though omicron has a little repelled the rebound. .
Just before its capital markets day in mid-December and just ahead of its earnings call, the airline surveyed corporate clients. “And what we’ve seen is that the percentage of customers who thought in the first quarter that they would travel as much or more has dropped slightly, but it still remains that 80% of business travel survey respondents thought they would travel as much or more in the first quarter than they did in the fourth quarter,” Delta Air Lines president Glen Hauenstein said during earnings calls. “Office reopenings have been pushed back , as you know.”
He expects, however, that in the spring and summer, demand for business travel will be strong “as people get back to their usual routines and feel safe to travel”.
Bastian described business travel as “kind of waiting. They’re trying to figure out what’s going on with omicron. They’re trying to figure out when their offices – if they’re not back, when they’re going to open. “
But as the wave of omicron peaks in various parts of the country and declines in some places, Bastian said business leaders feel more encouraged “that they’re going to be able to come back and get their employees in, open their offices more sooner than maybe they thought when the first news of omicron arrived.”
Delta Air Lines saw growth in business travel in the fourth quarter, not only for larger corporations, but also for small businesses, which is a travel niche Delta will be focusing more on.
“Small businesses…that’s something we haven’t talked about so much historically, but it’s just a big pool because the business space is for us,” Bastian said. “And then when those offices open, starting this spring, we think it’s going to pick up where we left off in December and grow from there.”
The airline sees a correlation between office reopenings and business travel.
“A lot of business trips are triggered by visiting businesses, and businesses are closed. That makes things a little harder to do,” Bastian said. “It’s not one-to-one. But the fact that, particularly large companies, the fact that our overall level of business demand, volume performance is actually quite closely correlated, and maybe that’s Whether it’s a coincidence or not, I don’t know. But the numbers correlate quite closely to the number of reopenings we’ve seen, indicating that there’s a real cause and effect there.”
Delta’s CEO pointed out that the office is not the only factor in business travel. “We have a lot of people traveling who are not back in the office yet,” Bastian said.
But he expects there will be “a lot of noise” in the numbers due to the fact that he felt the airline “navigated through … it felt like two or three pandemics at the time. course of 2021 with the different variants”.
“The good news is that all of our companies say they are looking forward to reconnecting with people and being with their own employees, being with their customers, discovering new opportunities and investing for the to come up. And I think it’s going to be a strong spring and summer,” Bastian said. “They’re just waiting for the clear sign that you don’t have to worry about a variant while you’re traveling.”
Delta has made domestic market share gains on the enterprise side of its business during the pandemic, “a significant and outsized share gain,” according to Bastian, primarily among larger companies focused on premium reservations. “They appreciated the work we did in blocking middle seats for the duration of the pandemic when it was quite active,” he said.
“We had kind of plateaued at a pre-pandemic level, and our market share is significantly higher than our natural seat share in those markets,” Bastian said. “I think we’re going to work hard to make sure we maintain it. And if we can develop it, we will.”
But Delta’s CEO said the kind of incremental market share growth he’s seen during the pandemic can’t be sustained over the next two years.
The airline plans to focus more on the lower-premium business travel class, according to Hauenstein, with what he described as “big plans for our long-haul premium leisure sector.”
The new product, Delta Premium Select, will be ubiquitous in the transatlantic market, and is designed for both high-end leisure and business travelers whose travel policies do not include the Delta One flatbed product. .
“The early yields are phenomenal, well above our expectations,” Hauenstein said.