Delta Air Lines is “cautiously bullish” about the demand environment for the summer season and beyond, according to CEO Ed Bastian.
“We feel pretty strongly that we're going to continue to see the strong demand extend beyond just the normal summer surge but into the fall,” he told analysts and reporters on an April 13 conference call to discuss the company’s $940 million first-quarter net loss.
Delta expects its first-half 2022 capacity to be 80-85% of 2019 capacity and second-half capacity to be around 95% of 2019 levels, president Glen Hauenstein said.
As demand returns, Bastian said Delta is not as constrained by staffing issues as it was in 2021 and earlier this year. “Restoring capacity during a period of rapid demand recovery has proven challenging for all of us in the industry” because of staffing shortages, he conceded, but added that Delta has hired 4,000 new employees this year.
“We feel good about our staffing and our ability to meet demand as we continue to restore the airline,” he said.
While Delta executives feel optimistic about the growing strength of the industry’s recovery from the COVID-19 crisis, Delta will remain “disciplined” about capacity because of “macro uncertainty,” Bastian said. “We will remain nimble on capacity for the second half of the year.”
“The priority is to operate reliably and … not get ahead of demand,” Hauenstein said, noting that the demand rebound is too new to be fully trusted.
“This is a very recent demand increase that we've seen,” he said. “The uptick just started about six to eight weeks ago, in late February and March. And so as we get through the year, if these demand trends continue, we have the opportunity to take another tick-up or we could pivot in a different direction if warranted.”
Bastian indicated he believes other airlines have been too aggressive in adding back capacity, leading to operational disruptions. “It's been interesting to watch because a lot of airlines have taken different approaches over the course of the last two years,” he said. “Fundamentally, our commitment and our promise to our customers is to give them a great, safe, on-time, reliable experience.”
Hauenstein said there has been a surge in demand as the COVID-19 wave caused by the omicron variant has faded in the US. “While omicron depressed demand in January and early February, we saw an unparalleled demand recovery from [mid-February] on,” he explained.
He said domestic and Latin American flying is leading the recovery. Delta expects a big pickup in transatlantic travel this summer.
“Fewer restrictions in major international markets are unlocking demand for long-haul travel,” Hauenstein explained. “We expect a very strong summer in the transatlantic based on demand trends … It does look like the transatlantic business is returning robustly, and that's very exciting for us.”
While the transpacific recovery is expected to take longer, Hauenstein said Delta is “encouraged by the opening of Australia, South Korea and other countries in Southeast Asia,” adding: “When countries reopen, we see a rapid restoration of demand. For example, following South Korea's border opening on April 1, we expect load factors to improve from the low 50s in March to the low 90s by June.”
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