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Delta Plans Retirement of Boeing 777 Fleet Amid Coronavirus Woes

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Delta Air Lines Inc (DAL - Free Report) has decided to permanently retire its Boeing 777 fleet by the end of this year as part of its efforts to reduce costs and align its network according to the low demand scenario resulting from the COVID-19 crisis.

The Atlanta-GA based airline, which is currently burning $50 million cash everyday, aims to reduce its cash burn rate to zero by the end of this year. The fleet retirement plan is a step toward this financial goal through a reduced fleet size, network and overall operations over the next two to three years. In line with this objective, the carrier has already accelerated the retirement of its MD-90 aircraft, which is set to be removed in June 2020.
In connection with the retirement of these aircraft, the Zacks Rank #3 (Hold) company expects to record non-cash impairment charges of $1.4-$1.7 billion, before tax, in the second quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Boeing 777 fleet, consisting of 18 aircraft, has been integral to Delta’s operations since 1999, enabling it to expand international base by launching long-haul flights. The Boeing 777 aircraft will now be substituted by the A330s and A350-900s for long-haul flights on international routes as these are less costly and more fuel-efficient.

Shares of Delta have plunged more than 65% since the beginning of February due to coronavirus-induced travel demand woes.


The impact of coronavirus is well reflected in Delta’s first-quarter 2020 earnings report. It incurred a loss (excluding 33 cents from non-recurring items) of 51 cents, narrower than the Zacks Consensus Estimate of a loss of 72 cents. Delta had reported earnings of 96 cents per share (on an adjusted basis) in the year-ago quarter, driven by high passenger revenues as air-travel demand was buoyant at that time. Delta’s peers like American Airlines (AAL - Free Report) , United Airlines (UAL - Free Report) and Southwest Airlines (LUV - Free Report) also incurred losses in the first quarter. Each of the stocks carries a Zacks Rank #3.

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