What Delta Air Lines plans for business travel after omicron

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Delta Air Lines jets are seen on a taxiway at Hartsfield-Jackson Atlanta International Airport in Atlanta, Georgia, United States, December 22, 2021.

Elie Nouvelage | Reuters

For Delta Air Lines, the Covid situation is not as bleak as it could be. Its outlook released Thursday along with its fourth quarter 2021 earnings report forecast profit of around $400 million for the second half of this year, and its CEO Ed Bastian noted that this would make Delta “the only major airline US to achieve second-half profitability.”

Delta still expects to lose money in the first quarter, but the first quarter will be the only loss-making quarter of 2022 in the spring and summer,” Bastian said on the earnings call.

Investors are more confident now than they were in the spring of 2020 about the airline industry, and Delta is feeling pretty good — even in a difficult public health and workforce environment that has seen 8,000 of its workers infected during the last wave – that it announced a special profit-sharing payment for all global employees to be paid on February 14, of $1,250.

Delta said there was a silver lining in omicron hitting during what is typically a lighter season for bookings and by the time this Covid wave passes – if it progresses as expected faster than previous waves – there will be plenty of time for leisure travelers who have delayed summer plans to still book vacations.

Business travel, however, is another story, but Delta doesn’t see the “death of business travel” — predicted by many at many points in the pandemic — as being more likely now, even though omicron has a little repelled the rebound. .

Just before its capital markets day in mid-December and just ahead of its earnings call, the airline surveyed corporate clients. “And what we’ve seen is that the percentage of customers who thought in the first quarter that they would travel as much or more has gone down slightly, but it’s still 80% of respondents to the travel survey d ‘businesses who thought they would travel as much or more in the first quarter as they did in the fourth quarter,’ said Glen Hauenstein, president of Delta Air Lines, during earnings calls. ‘Office reopenings have been pushed back, as you you know it.”

He expects, however, that in the spring and summer, demand for business travel will be strong “as people return to their usual routines and feel safe to travel”.

Bastian described business travel as “a kind of waiting. They are trying to figure out what is going on with omicron. They’re trying to figure out when their offices – if they’re not back, when they’re going to reopen.

But as the wave of omicron peaks in various parts of the country and declines in some places, Bastian said business leaders feel more encouraged “that they’re going to be able to come back and get their employees in, open their offices more sooner than maybe they thought when the first news of omicron arrived.

Delta Air Lines saw growth in business travel in the fourth quarter, not only for larger corporations, but also for small businesses, which is a travel niche Delta will be focusing more on.

“Small businesses…that’s something we haven’t talked about so much historically, but it’s just a big pool because the enterprise space is for us,” Bastian said. “And then when those offices open, starting this spring, we think it’s going to pick up where we left off in December and grow from there.”

The airline sees a correlation between office reopenings and business travel.

“A lot of business trips are triggered by visiting businesses, and businesses are closed. That makes it a bit more difficult to do that,” Bastian said. that, especially large companies, the fact that our overall level of business demand, volume performance is actually quite closely correlated, and maybe that’s a coincidence or not, I don’t know. numbers correlate quite closely to the number of reopenings we’ve seen, indicating that there’s a real cause and effect there.”

Delta’s CEO pointed out that the office is not the only factor in business travel. “We have a lot of people traveling who haven’t come back to the office yet,” Bastian said.

But he expects there will be ‘a lot of noise’ in the numbers due to the fact he felt the airline was ‘navigating through… it felt like two or three pandemics over the course of of 2021 with the different variants”.

“The good news is that all of our companies say they are looking forward to reconnecting with people and being with their own employees, being with their customers, discovering new opportunities and investing for the to come up. And I think it will be a strong spring and summer,” Bastian said. “They’re just waiting for the clear sign that you don’t have to worry about a variant while you’re traveling.”

Delta has made domestic market share gains on the enterprise side of its business during the pandemic, “a significant and outsized share gain,” according to Bastian, primarily among larger companies focused on premium reservations. “They appreciated the work we did in blocking middle seats for the duration of the pandemic when it was quite active,” he said.

“We had kind of plateaued at a pre-pandemic level, and our market share is significantly higher than our natural seat share in those markets,” Bastian said. “I think we will work hard to make sure we maintain. And if we can develop it, we will.

But Delta’s CEO said the kind of incremental market share growth he’s seen during the pandemic can’t be sustained over the next two years.

The airline plans to focus more on the below-premium business travel class, according to Hauenstein, with what he described as “big plans for our high-end long-haul leisure sector.”

The new product, Delta Premium Select, will be ubiquitous in the transatlantic market, and is designed for both high-end leisure and business travelers whose travel policies do not include the Delta One flatbed product. .

“The early yields are phenomenal, well above our expectations,” Hauenstein said.

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