Delta Airlines has reported a pre-tax loss of USD 607 million, or a loss of USD 0.84 per share, in the first quarter 2020, due to COVID-19, the company said.
The COVID-19 crisis forced airlines to ground aircraft and cut capacity. The losses were the first time Delta reported a negative result in five years.
Delta is making several changes to reduce their spending and stabilize business. For the June quarter, the airline will reduce total system capacity by 85 percent. The domestic network will be reduced by 80 percent of its normal capacity, while international capacity will be cut by 90 percent.
Of the flights operating, middle seats are blocked and automatic upgrades are being paused until further notice. The airline is also modifying the boarding process to ensure passengers stay six feet apart and meal service is reduced to essentials only.
On the ground, over 650 aircraft will be grounded until further notice, while Delta Sky Clubs will remain closed. The moves will help Delta save an estimated USD 5 billion compared to the same period in 2019, and secure USD 10 billion in liquidity by the end of the quarter.
Delta has come to terms with the Federal government on how much support they will take out of the CARES Act fund. The airline is expected to receive USD 5.4 billion in support: USD 3.8 billion in grants and a USD 1.6 billion low-interest, unsecured loan repayable over 10 years. Despite the support, the airline is offering 37,000 employees a short-term unpaid leave, while enacting an indefinite hiring freeze.
In exchange, the carrier will also offer a stock purchasing program to the US Treasury in exchange for the financial aid. Delta will issue a warrant to the government to purchase up to 6.5 million common shares in the airline, at a price of USD 24.39 each with a five-year maturity.