Delta Air delays $5bn of jet deliveries in blow to Airbus

Bloomberg

Delta Air Lines Inc is delaying $5 billion in aircraft deliveries until after 2022, dealing a blow to Airbus SE as the US carrier braces for years of weak travel demand.
The deferrals include about $2 billion in planes that were scheduled to be handed over this year, Delta said in a
statement as it reported worse-than-expected quarterly results. The delays extend to a small number of CRJ regional jets made by Bombardier Inc, Delta said, without providing a comprehensive breakdown of all the planes affected.
The revamped delivery schedule will ease cash strains during the next two years as Delta shrinks its operations to contend with the coronavirus pandemic, which has caused an unprecedented collapse in commercial flying.
Like other airlines, the Atlanta-based company has already slashed spending by parking planes, cutting flights and thinning its employee ranks in response to the crisis.
“This has less to do with the outlook for demand and more to do with our cash situation,” Delta Chief Executive Officer Ed Bastian said in an interview. “It’s an indication of a great partnership with Airbus and the recognition that we’re playing the long game and are still going to take these aircraft.”
The Delta deferrals, which include 77 aircraft that were to have been delivered through the end of next year, underscore the pressure on Airbus and rival Boeing Co to preserve orders even as their customers have little need for new aircraft. Delta is also planning to retire 400 planes by 2025, including 200 this year.
Airbus has been in talks with a number of airlines, but doesn’t comment on individual customers, a spokesman said.
Delta is the first major US airline to report third-quarter earnings, setting the tone for an industry that has been slammed by the pandemic. Bastian said Delta wouldn’t be able to break even on a cash-flow basis until next year, updating an earlier forecast that the company would reach that milestone by the end of 2020.
“We are not surprised to see the target slip, given where we are today in terms of demand,” Helane Becker, a Cowen & Co analyst, said in a report. “Delta will need some rebound in business and international travel before cash-flow breakeven is achievable.”
Daily cash burn will average $10 million in December, and $10 million to $12 million for the fourth quarter as a whole, Bastian said.
That’s down from $24 million in the third quarter. Delta lowered operating costs 50% in the three months ending on September 30 from the same period a year earlier.
“We’re getting a pretty good line of sight to break even by the spring,” the CEO said regarding cash burn. “The fact that we get down to $10 million is pretty darn good when we were at $100 million in March.”