Delta Air Lines is reducing flights by 15%, freezing hiring and asking employees to voluntarily take time off to stymie financial damage of the worldwide coronavirus outbreak.
The Atlanta-based company announced a series of cost-reducing measures Tuesday as it and all other airlines witness significant declines in demand for travel from customers trying to minimize their exposure to others who may unknowingly be carrying the virus.
Such dramatic actions haven't been seen in the aviation industry since the Great Recession when many airlines collapsed, consolidated and went bankrupt.
"There have been spot cutbacks where various issues drove those demand cuts, but this is certainly the first network-wide cutback in years," said Bob Mann, a consultant and former airline industry executive.
The most profitable airline in the world in recent years, Delta is taking steps that mirror those of other carriers, including rivals United and American airlines.
"As the virus has spread, we have seen a decline in demand across all entities, and we are taking decisive action to also protect Delta's financial position," said Delta chief executive Ed Bastian in a statement.
The airline is reducing international flight capacity, which produces about one-fourth of its overall revenue, by 20% to 25%. Its capacity in the U.S. will be cut 10% to 15%.
The steepest cut will be on Delta's routes over the Pacific to Asia, where the virus originated. Delta is cutting that capacity by 65%.
It's not that airplanes are flying empty, Mann said, but that the tickets being sold are deeply discounted. "It's a lot of stimulated leisure traffic, which doesn't pay as much as the business traveler," he said.
Airlines have implemented flexible booking options, including waived change fees, to encourage travel. Meanwhile, many corporations have curtailed business travel for their employees, which is where fares airlines make the most money.
Delta _ the dominant carrier at Minneapolis-St. Paul International Airport _ is also instituting a companywide hiring freeze and offering voluntary leave options, though it didn't provide details on what that might look like for workers. The company is also grounding aircraft and may retire some of its older aircraft ahead of schedule to get those large expenses off its balance sheet.
Monday's sharp declines in oil prices is a bright spot for it and other airlines. Delta said it expects to save about $2 billion from lower fuel costs this year.
The company said it would also defer $500 million in capital expenditures, delay $500 million of voluntary pension funding and suspend share repurchases. The company had $5 billion in capital expenditures and spent $2 billion on share repurchases in 2019. Total revenue was $47 billion.
"Over the last 10 years, we've transformed Delta by strengthening the balance sheet, diversifying our revenue streams and enhancing operational and financial flexibility," Bastian said. "The environment is fluid and trends are changing quickly, but we are well positioned to manage this challenge and are taking actions to ensure that Delta maintains its leadership position and strong financial foundation."
Delta owns 11% of Korean Air, which warned Monday it is facing an existential threat if the coronavirus outbreak doesn't calm down soon.
The Dow Jones Transportation Average, the index for 20 transport stocks including major U.S. airlines, is down more than 24% since Feb. 20. Delta's stock is down 22% in the same period.
Delta shares were up 3% Tuesday morning amid a broader rally in stocks.
