Delta Reports Loss Amid Omicron Surge but Expects to Make Recovery

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The airline expects the variant to delay demand recovery by 60 days, but said its effect will begin to wear off soon

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Delta Chief Executive Ed Bastian said in an interview that Omicron Edition lost about $75 million in the fourth quarter, which includes a loss of revenue from canceled flights and a slowdown in bookings.

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“It came literally overnight, not only for us but for our country,” Mr Bastian said in an interview. With the high number of passengers, the airline struggled to manage the rising rates of sick calls by employees and the challenging weather. “It was the most difficult holiday operation we have ever experienced,” Mr Bastian said.

Delta on Thursday reported a loss of $408 million in the fourth quarter after two profitable quarters. For the full year, the airline reported a profit of $280 million. Excluding the impact of certain charges and government aid earlier in the year, Delta reported an adjusted profit of $143 million for the quarter and a loss of $2.6 billion for the year.

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Mr Bastian said the number of cases among Delta employees was declining rapidly and the airline’s operations had stabilized over the past week. He said the number of pilots has fallen by about a third from the peak, and flight attendant sick rates have been halved. Delta said it had canceled just 1% of flights in the past seven days because of Omicron.

“We think the worst is behind us, hopefully,” said Mr Bastian. During Omicron’s boom, about 8,000 Delta employees have come down with Covid-19, and the airline is canceling 5% to 10% of daily flights, he said.

Other airlines have also faced similar difficulties. United Airlines Holdings Inc. Chief Executive Officer Scott Kirby said this week that the airline has about 3,000 combined employees with active COVID-19 infections. He said about a third of the airline’s employees were sick at Newark Liberty International Airport on a recent day. Flight cancellations have started to decline in recent days after at least 1,000 canceled flights a day lasting more than two weeks.

The rapid spread of the new version has also slowed the resurgence of travel demand that had been going on for much of the previous year. With some companies pushing back plans to bring workers back to offices, the business-travel recovery that airlines are counting on once again appears to be delayed.

Delta expects Omicron to continue to weigh on demand in the near term, delaying a demand recovery by 60 days before the effects of the variant emerge as quickly as it should. The airline had previously expected travel appetite in January and February to peak in December, when demand had returned to close to 80% of 2019 levels. Instead, Mr Bastian said, demand is about 70% of 2019 levels.

Delta said it sees bookings restarting around Presidents Day weekend in February, and expects the airline to be profitable again in March. In the first quarter, Delta expects revenue to recover between 72% and 76% of 2019 levels, compared to 74% in the fourth quarter.

As a result, the airline is not supporting flight plans for the rest of the year. “We don’t see any reason to adjust at this point. We’ll deal with this thing quickly,” Mr. Bastian said.

Omicron isn’t the only challenge airlines face, as they navigate a rocky recovery from the pandemic. Carriers are also facing higher costs for labor and fuel. Mr Bastian said Delta hired about 9,000 people in 2021, for the most part without increasing the airline’s pay scale. Delta expects fuel costs to rise to $2.35 to $2.50 per gallon in the first three months of the year, up from an adjusted fuel price of $2.10 per gallon in the fourth quarter.

Delta’s fourth-quarter results were also adjusted to reflect a special profit-sharing payout of $108 million to employees.

According to FactSet, Delta reported an adjusted profit of 22 cents during the quarter, well above the 16 cents per share profit analysts were expecting.

Write Alison Cider at [email protected]

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