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Delta Expects Q3 Capacity to Decline 60% Amid Demand Woes

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Amid weak air-travel demand thanks to coronavirus, Delta Air Lines Inc (DAL - Free Report) anticipates system capacity to decline approximately 60% year over year in the third quarter of 2020. This includes an approximate 80% reduction in international capacity and 50% decrease in domestic capacity. Anticipating continued weakness in demand and low capacity, the carrier parked approximately 40% of its mainline fleet. This includes the permanent retirement of certain aircraft as well.

The coronavirus-led suppressed travel demand is also affecting the performance of Delta’s SkyMiles loyalty program. Due to weak travel demand, total miles redeemed in the first six months of 2020 declined by 78% year over year. Consequently, loyalty travel-award revenue for Delta declined 59% in the same period.

With travel demand significantly below year-ago levels, Delta is aiming to attract passengers by boosting safety measures as well as by offering passengers with flexibilities to change travel plans with ease. To this end, the carrier is blocking middle seats and limiting the number of passengers per flight through at least Jan 6, 2021. Additionally, the airline has permanently eliminated change fees for domestic travel. This benefit is applicable on Delta’s First Class, Delta Premium Select, Delta Comfort+ and Main Cabin tickets except for Basic Economy on travel within the United States, Puerto Rico and the U.S. Virgin Islands. Delta also plans to extend its waiver on change fees for new tickets purchased for international flights through the end of this year. This would include Basic Economy tickets as well.


Fellow airline players, namely United Airlines (UAL - Free Report) and American Airlines (AAL - Free Report) , have also permanently eliminated change fees. While United Airlines customers can enjoy this benefit only for domestic travel, American Airlines’ passengers can avail this facility for traveling to Canada and Mexico as well. Notably, Southwest Airlines (LUV - Free Report) never had a policy to charge for ticket changes.

Each of the stocks mentioned above carry a Zacks Rank #4 (Sell), except for Delta, which carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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