What Delta Air Lines predicts for business travel after ommicron

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

Elijah Nouvelage | Reuters

For Delta Air Lines, the Covid situation is not as grim as it could be. The outlook released Thursday, along with the earnings report for the fourth quarter of 2021, calls for earnings of about $400 million for the second half of this year, and CEO Ed Bastian noted that Delta is “the only major U.S. carrier would be representing the second half of profitability.”

Delta still expects to lose money in the first quarter, but Q1 will be the only loss-making quarter of 2022. “We are confident that we will generate meaningful earnings for the full year 2022 as the recovery resumes and accelerates in the spring and summer,” Bastian said during the earnings call.

Investors are now more confident than they were in the spring of 2020 in the airline sector, and Delta is feeling well enough — even amid difficult public health and personnel conditions that have infected 8,000 of its employees during the latest wave — that it has announced a special profit-sharing payment. for all global employees, payable Feb. 14 of $1,250.

Delta said there has been a silver lining in omicron during what is typically a lighter season for bookings and by the time this wave of Covid passes — if it progresses faster than previous waves — there will be plenty of time for vacationers who have postponed summer plans to still to book holidays.

Business travel is a different story, though, but Delta now sees the “death of business travel” — which was predicted by many at many points during the pandemic — no more likely now, even if omicron were to push the resurgence a bit.

Just before capital market day in mid-December and just before the earnings call, the airline surveyed corporate customers. “And what we saw was that the percentage of customers who thought they would travel the same or more in the first quarter decreased slightly, but it was still 80% of respondents to the business travel survey thought they would travel the same or more in the first quarter. quarter than in the fourth quarter,” Glen Hauenstein, president of Delta Air Lines, said of the earnings calls. “The reopening of offices has been postponed, as you know.”

However, he expects demand for business travel to be strong in the spring and summer “as people get back into their normal routine and feel safe traveling.”

Bastian described business travel as “a little bit of waiting. They’re trying to understand what’s going on with omicron. They’re trying to understand when their offices – if they’re not back, when they’re going to open.”

But as the ommicron wave is peaking in several regions of the country and declining in some places, Bastian said business leaders feel more encouraged “that they will be able to come back and get their people in, their offices faster.” then maybe they were thinking when the first news about ommicron came out.”

Delta Air Lines saw growth in business travel in the fourth quarter, not only for the largest companies, but also for small businesses, a travel niche that Delta will focus more on.

“Small business … is something we haven’t talked about much in the past, but it’s just a big pool the way the business space is to us,” Bastian said. “And then if those offices open this spring, we think it’ll pick up where we left off in December and grow from there.”

The airline sees a connection between reopening offices and business travel.

“A lot of business trips are triggered by visiting companies, and those companies are closed. That makes it a bit more difficult to do that,” Bastian says. “It’s not one-on-one. But the fact that, especially the big companies, the fact that our overall level of business demand, volume return is actually quite closely related, and maybe it’s coincidence or not, I don’t know. But the numbers are quite closely correlated with the number of reopenings we’ve seen, indicating that there is some real cause and effect.”

Delta’s CEO emphasized that the office is not the only factor in business travel. “We have a lot of people traveling who are not back in the office yet,” said Bastian.

But he expects there to be “a lot of noise” in the numbers due to the fact that it felt like the airline “went down the course of … it felt like two or three pandemics over the course of 2021 with the different variants.”

“The good news is that all of our companies say they just can’t wait to be with the people again and be with their own people, be with their customers, see new opportunities and invest in the future. And I think this is going to be a strong spring and summer,” said Bastian. “They’re just waiting for the clear sign that you don’t have to worry about a variant while traveling.”

Delta posted domestic equity gains on the corporate side of its business during the pandemic, “a meaningful and outrageous market share gain,” according to Bastian, usually one of the largest companies focused on premium bookings. “They appreciated the work we’ve done to block the center seats for the entire duration of the pandemic while it was quite active,” he said.

“We had kind of reached a plateau at pre-pandemic levels, and we have significantly more market share than our natural seat share in those markets,” Bastian said. “I think we’re going to work hard to make sure we keep it. And if we can grow it, we will.”

But Delta’s CEO said the kind of additional market share growth it saw during the pandemic cannot be sustained for years to come.

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

The new product, Delta Premium Select, will be ubiquitous in the transatlantic market, and it is designed for both more luxurious leisure travelers and business travelers whose travel policies do not include the flat-bed Delta One product.

“The early returns are phenomenal, way beyond our expectations,” Hauenstein said.


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