Delta Air Lines’ corporate travel volume in recent weeks has grown to its highest point during the Covid-19 pandemic recovery, with domestic business travel volume last week nearing 50 percent of pre-pandemic levels, CEO Ed Bastian said Wednesday in Delta’s third-quarter earnings call.
For the overall third quarter, domestic corporate travel volumes were about 40 percent recovered, which is 10 percentage points higher than their recovery rate in the second quarter, Bastian said. While corporate travel recovery “paused” in August and early September while Covid-19 case counts grew with the spread of the delta variant, spurring many companies to delay return-to-office plans, demand since Labor Day once again has picked up, he said.
Delta’s most recent survey of its corporate customers indicated that 90 percent expect their travel volumes in the fourth quarter to be equal to or higher than third-quarter levels, according to Bastian. About 60 percent of Delta’s corporate customers said they have reopened their offices, and an additional 10 percent said they would do so before the end of 2021.
“We anticipate meaningful acceleration in business travel starting at that point,” Bastian said. “We hear regularly from our corporate customers that they’re ready to get back to travel, see their clients face-to-face, renew business relationships and develop new ones.”
Business travel volumes from unmanaged programs are running five to 10 percentage points ahead of managed programs, with “smaller, hungrier companies out there hitting the road sooner than some of the bigger multinationals,” Delta president Glen Hauenstein said.
International business travel also is showing signs of recovery, he said. In the second and third quarter, corporate travel to Europe was running at about 15 percent of pre-pandemic levels, but that has improved to 30 percent in recent weeks with the news that the U.S. will open to vaccinated foreign visitors next month. Long-haul travel to South America, previously “pretty much nonexistent,” also has started to recover, and the Pacific region could be next in line, according to Hauenstein.
“We are expecting those to improve significantly … as the vaccination rates in important places for us like Korea and Japan are now approaching between 70 percent and 80 percent,” he said. “Hopefully, we get some good news out of that region of the world starting in the next few months.”
Domestic leisure travel, meanwhile, has made a “full return” to 2019 levels, Bastian said. Delta’s passenger revenue for the third quarter was $7.2 billion, 37 percent of 2019 levels, and total third-quarter operating revenue was 27 percent of 2019 levels, boosted by a 39 percent increase in cargo revenue compared with 2019.
Delta executives noted that premium travel revenues have been strong even with the lower rates of business travel and indicated that Delta would look to increase premium seating capacity in the future.
“We’re selling [premium seats] 10 points higher than we did pre-pandemic,” Bastian said. “We always ran relatively full in terms of load factor, but a lot of those are complimentary upgrades, and we’re seeing people are willing to pay us for those seats. That’s why we want to create more over time.”
Delta reported net income of $1.2 billion for the third quarter, which included the benefits from federal aid due to the pandemic. Excluding that and other special items, Delta still reported net income of $194 million for the quarter, its first such profitable quarter since the pandemic began.
Bastian said he expected the carrier would see a “modest loss” in the fourth quarter due to rising fuel prices.