Delta Air Lines To Permanently Retire Boeing 777 From Fleet; Coronavirus Fare Refunds Top $1.2 Billion

Delta said it's burning $50 million in cash each day, a rate it hopes to reduce to zero by the end of the year.
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Delta Air Lines  (DAL) - Get Report said Thursday that it will no longer use Boeing Co.'s  (BA) - Get Report 777 aircraft as it attempts to reduce costs and preserve cash amid a plunge in traffic from the coronavirus pandemic.

Delta said it's burning through $50 million in cash each day, and that its forecasts for sharply reduced traffic will mean it needs a smaller network, and aircraft fleet, in the years ahead. The carrier also said it has refunded more than $1.2 billion in customer fares since the pandemic began, including $160 million payments so far this month. 

"The board of directors on May 13, 2020 authorized a plan to retire our Boeing 777 aircraft and remove them from service by the end of 2020," the company said in a filing with the Securities and Exchange Commission. "We also previously determined to accelerate the retirement of our MD-90 aircraft, which will exit the fleet effective June 2020."

"These decisions are intended to better align our network with lower passenger demand stemming from the COVID-19 pandemic, streamline and modernize our fleet, and generate cost savings," the company said.

Delta shares were marked slumped 8.3% lower in early trading Thursday following the update to change hands at $17.70 each, a move that would extend the stock's year-to-date decline past 70%. 

Boeing shares were seen 6.1% lower at $114.03 each, tipping its six-month decline to around 70%.

Shares were also pressured by a report from Reuters, citing a company memo, that the carrier may have more than 7,000 more pilots than needed by the autumn, further underlying the scope of changes expected to capacity and traffic in the months ahead. 

"With the unprecedented drop in travel demand amid the COVID-19 pandemic and global economic slowdown, we continue to take action to protect Delta’s cash, Delta jobs and Delta’s future," CEO Ed Bastian said in a letter to staff. "Our principal financial goal for 2020 is to reduce our cash burn to zero by the end of the year, which will mean, for the next two to three years, a smaller network, fleet, and operation in response to substantially reduced customer demand."

The International Air Transport Association lobby group, known as IATA, said last month that global airline passenger volumes for the month of March fell to the lowest levels since 2006, with revenues down 52.9% from the same period last year.

Cargo traffic was down 15% from the prior year, IATA noted, and is likely to fall between 14% and 31% for the whole of 2020,

IATA also warned that, even as countries around the world lift travel restrictions as coronavirus case numbers subside, demand is likely to remain subdued for several months and the industry faces a $314 billion hit to revenues that could cost some 25 million industry-related jobs.

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