- Delta executives predict that corporate travel will return in the spring at a similar level to where it had rebounded before the omicron variant.
- It's wait-and-see right now, but 80% of corporate travel survey respondents thought they would travel the same or more in the first quarter than they did in fourth quarter, before office reopening delays pushed that out.
- "When we get to spring and summer, that we'll see a robust demand for business travel," said Delta president Glen Hauenstein on its earnings call Thursday.
For Delta Air Lines, the Covid situation isn't as grim as it could be. Its outlook on Thursday issued along with its fourth quarter 2021 earnings report calls for a profit of roughly $400 million for the second half of this year, and its CEO Ed Bastian noted that would make Delta "the only major U.S. airline to achieve second-half profitability."
Delta still expects to lose money in the first quarter, but Q1 to be the only loss-making quarter of 2022. "We're confident that we'll generate a meaningful profit for the full year of 2022 as the recovery resumes and accelerates in the spring and the summer," Bastian said on the earnings call.
Investors are more confident now than they had been in the spring of 2020 about the airline sector, and Delta is feeling good enough — even amid difficult public health and staffing conditions which has seen 8,000 of its workers infected during the latest 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 wave of Covid passes — if it progresses as predicted more quickly than past waves — there will be plenty of time for leisure travelers who delayed summer plans to still book vacations.
Business travel, though, is a different story, but Delta doesn't see the "death of business travel" — predicted by many at many points during the pandemic — as being any more likely now, even if omicron pushed out the rebound a little.
Right before its capital markets day in mid-December, and right before its earnings call, the airline surveyed corporate clients. "And what we saw was that the percentage of customers who thought in the first quarter that they would travel the same or more went down slightly, but it was still 80% of the corporate travel survey respondents thought they would travel the same or more in the first quarter than they did in fourth quarter," said Glen Hauenstein, Delta Air Lines president, on the earnings calls. "Office reopenings have been pushed out, as you know."
He expects, though, that in the spring and summer, demand for business travel will be strong "as people get back into the regular routine and feel safe traveling."
Bastian characterized business travel as being "kind of a wait and see. 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 omicron wave peaks in various regions across the country, and decline in some places, Bastian said corporate executives are feeling more encouraged "that they're going to be able to get back and get their people in, open their offices sooner than maybe they were thinking when first news of omicron came."
Delta Air Lines had seen growth in business travel in the fourth quarter, not just for the largest corporations but small business, which is a travel niche Delta will be leaning into more.
"Small businesses ... is something we haven't talked as much about historically, but it's just a big pool as the corporate 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 travel is triggered by going to visit companies, and the companies are closed. It makes it a little more difficult to do that," Bastian said. "It's not a one for one. But the fact that, particularly the big corporates, the fact that our overall level of corporate demand, the volume return is actually fairly closely correlated, and maybe it's coincidence or not, I don't know. But the numbers are pretty tightly correlated to the amount of reopenings we've seen, indicates there's a real cause and effect there."
The Delta CEO stressed that the office is not the only factor in business travel. "We have a lot of people traveling that aren't back into office yet," Bastian said.
But he expects there is "a lot of noise" in the numbers due to the fact that it felt like the airline "navigated the course of ... it felt like two or three pandemics over the course of 2021 with the various variants."
"The good news is that all of our corporates are saying they just can't wait to get back to be with people and be with their own people, be with their customers, visit new opportunities and invest for the future. And I think this is going to be a strong spring and summer," Bastian said. "They're just waiting for the all-clear sign that you don't have to worry about a variant as you're traveling."
Delta made domestic share gains on the corporate side of its business during the pandemic, "a meaningful and an outsized share gain," according to Bastian, mostly among the biggest corporates focused on premium bookings. "They appreciated the work we did around blocking the middle seats for the entire length of the pandemic while it was quite active," he said.
"We kind of had plateaued at a level pre-pandemic, and we are significantly higher in share than our natural seat share is in those markets," Bastian said. "I think we're going to work hard to make sure we maintain. And if we can grow it, we will."
But the Delta CEO said the type of additional market share growth it saw during the pandemic cannot be sustained over the next couple of years.
The airline is planning to focus more on the class of business travel below premium, 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 marketplace, and it is designed both for higher-end leisure and corporate travelers whose travel policies don't include the flat-bed Delta One product.
"Early returns on that are phenomenal, far above our expectations," Hauenstein said.