Please ensure Javascript is enabled for purposes of website accessibility

Delta to Hit the Brakes on Growth as the Pandemic Worsens

By Lou Whiteman – Updated Jun 25, 2020 at 5:21PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If revenue is not going up, layoffs become much more likely.

Delta Air Lines (DAL 8.81%) will likely not add much to its schedule for the remainder of the year beyond the 1,000 new flights in late summer it has already announced, a reminder of the prolonged impact COVID-19 will have on the industry.

In recent weeks, airlines have been slowly rebuilding their schedules as travel demand begins to climb off of April lows, but Delta CEO Ed Bastian told employees on Thursday that he believes the airline is "at least two years away from a return to normal."

A Delta jet parked on the tarmac.

Image source: Delta Air Lines.

Airlines are taking steps to restore consumer confidence in flying, including limiting plane capacity and requiring the use of masks. But with cases spiking in a number of key tourism-focused states, it remains possible that traffic levels will not recover as quickly as some investors have hoped.

Bastian said that the plan to add up to 1,000 flights by August is still on, but Delta does not expect to add significant additional capacity beyond those flights for the remainder of 2020.

A slow recovery would likely be bad news for both employees and investors. Delta said last week it believes it can cut its cash burn to zero by early 2021 either by increasing revenue or by cutting expenses. If revenue does not return heading into the fall, the chances rise that Delta and other airlines will look to do significant headcount reductions before year's end.

Lou Whiteman owns shares of Delta Air Lines. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Delta Air Lines, Inc. Stock Quote
Delta Air Lines, Inc.
DAL
$30.75 (8.81%) $2.49

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
331%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.