Bastian: Recovery Will be Like Nike's Swoosh
- Delta CEO Ed Bastian spoke by video with Business Travel News (BTN), expressing grief over the death of George Floyd in Minneapolis, where Delta has a major corporate presence. Bastian also honored the 10 Delta employees who have died from Covid-19. As for business, Delta is seeing “modest green shoots,” carrying about 65k passengers on the day Bastian spoke (June 3). This was still far below normal but up considerably from the low point in mid-April.
As economies start to open, the airline is seeing more discretionary travel, notably to non-city leisure destinations like Florida, Arizona, and the mountain states (i.e. Colorado and Utah). Business travel is still very quiet, though a few auto company executives in markets like Detroit are starting to fly again, following personnel from transportation companies like UPS and FedEx. Longhaul international demand will take at least 12 months to meaningfully recover, but Bastian already has eyes on restarting some services, notably to Seoul where the virus is largely under control, where cargo demand is heavy, and where Delta has a close ally in Korean Air.
Systemwide, load factors are approaching 50%, which is close to the 60% cap the carrier has temporarily imposed to reassure travelers. So it’s adding back flights, with June departures scheduled to be up 20% from May levels. July should see double the number of flights operated in May. As schedules get rebuilt, of course, connectivity options will grow.
As casinos, restaurants, hotels, and theme parks reopen, meanwhile, this will stimulate more leisure travel. And leisure travel itself will stimulate some business travel, as executives from leisure and hospitality companies need to start moving again. Disney, by the way, ranked number 31 on BTN’s latest list of top 100 corporate air travel spenders (the consultancy Deloitte tops the list, followed by IBM, PwC, EY, and Apple).
One bright spot for Delta is its American Express partnership, with spending on Delta-branded Amex cards down for sure, but down a lot less than its air traffic. Looking ahead, Bastian sees the U.S. airline sector shrinking between 10% and 30% over the next two or three years. The economic recovery, he guesses, will look like the Nike Swoosh, gradually rising after a big dip. But the recession is a big one, and a deeper concern than the public’s current virus fear, which should dissipate as treatments and perhaps vaccines are developed.
On the separate topic of Delta’s overseas partners, Bastian says they’ll need Delta’s help more than ever as they navigate the crisis, and in Latam’s case bankruptcy. Bankrupt Virgin Australia is a Delta joint venture partner too, albeit one less strategically important. Much more strategically important is Virgin Atlantic, which is still fighting to avoid bankruptcy, looking for government aid in the process.