Delta CEO: We cannot commit to no furloughs in October

Delta CEO Ed Bastian joins Yahoo Finance's Adam Shapiro to discuss the company's second quarter earnings, and what's next for the recovering airline industry.

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ADAM SHAPIRO: Well, the COVID-19 crisis is impacting Delta in ways that are just very dramatic. $3.9 billion, that was the loss in the second quarter. And when I spoke with Ed Bastian, the CEO, he put it in the terms of historic.

ED BASTIAN: The second quarter, as I think you appreciate, is the worst quarter that Delta ever posted. Revenues were down to only 10% of where they were second quarter a year ago. But the good news is that we're starting to see momentum come back to the airlines. It's modest.

We went from April, where we were only flying about 5% of our normal customer load, to today we're carrying somewhere around 20% of our normal customer traffic. And as a result of that, we've been able to significantly reduce the amount of cash burn that we were having over the course of the quarter.

ADAM SHAPIRO: In fact, the cash burn was down to $27 million. Are you still aiming for zero by the end of the year?

ED BASTIAN: We are. We are. It's unpredictable. This is a tough environment. We said at the start of the crisis that this-- the recovery was going to be very choppy, and indeed it was. The month of June was good. We saw a lot of momentum build over the course of June. But as we've seen the virus spike in the back end of June and the first half of July, air travel has stalled. I'd say it hasn't gone backwards, but it's stalled.

ADAM SHAPIRO: When you say it's stalled, I know that there was a plan to add flights. I think it was 1,000 July, 1,000 in August. Now it's just a thousand by the end of August. Do you see any ability to increase the number of flights? And the reason I ask you that is a Raymond James analyst put out a note in which they said although flight and Florida beach search trends have stalled, daily domestic flight searches are still inching up. That would seem like a good indicator, but is it on the scale you would need?

ED BASTIAN: Well, I think we're seeing, as I mentioned, it's going to be very choppy. You're going to see some regions of the country that are going to be going backwards. You're going to see some that are going to be forward. And I think everyone is-- is very sensitive to what's happening with the health conditions and the virus in the individual regions.

So we have the capacity to add as we need or pull-- pull the-- pull the flights down as we need. We've built a very dynamic schedule here to be able to make certain the demand we're seeing in the market matches up to the capacity we're offering. This summer we're at 25%, as an indication. So we've got a lot of planes if we need to add more.

ADAM SHAPIRO: You've got 40,000-plus employees on voluntary leave. The question a lot of those people, I would imagine, have, furloughs. Can you avoid furloughs October 1?

ED BASTIAN: We're doing our very best to avoid furloughs. We can't make any commitments, given the unpredictability and the choppiness of the recovery. But our team, our people are doing an amazing job. The month of July, for example, we had 35,000 people out without pay voluntarily, and we've been running that level for the last several months.

And we're just closing this month an early retirement offer for all of our people where we to date have over 17,000 people that have signed up. So it's about 20% of the company has signed up to depart.

ADAM SHAPIRO: At the end of the day, after October 1, would you have the necessary liquidity? Because I know at the end of the quarter you had $15.7 billion. But could you continue to have the voluntary leave program and still pay for people's health benefits, even though they wouldn't be getting salary?

ED BASTIAN: Yes, we intend to continue to do that. We've got-- even after the retirements of 17,000 that I mentioned, we still have thousands of people that have signed up for voluntary leaves of absence over the coming months into the fall. And yes, we have that same program in effect.

ADAM SHAPIRO: Delta is the only airline that has not put an end date on its commitment to block the middle seat. How long can you continue to do that without an end date? Because your revenue, as we know, is down. And you've said the airlines are going to be-- it's going to be, what, two to three years before you're back to any kind of real recovery.

ED BASTIAN: Yeah. Well, 60% load factor caps are not sustainable over the long term. But I think they're a really important ingredient to restoring consumer confidence in travel. And at Delta, we've seen consumers tell us that it's make-- that's the decision they're making is the airline that they feel safest on. It's got the best service, as always, but also has space available onboard.

I don't know how long it's going to continue. But I think it will continue until consumers are starting to feel more confident about their travel experience before we start putting people in middle seats.

ADAM SHAPIRO: How do you get we, the flying public, to understand it's very safe?

ED BASTIAN: If flying was dangerous for one's health, you'd expect our people-- our cabin crew, our pilots, our airport agents-- to be getting sick and contracting the COVID at rates-- at higher levels than anyone else in general population. And just the opposite is true. We've been tracking, after we put all of these safety measures, including masks. As of May the 1st, the rates of infection around our people are lower than the national average. And these are people who live in the environment. So I think air travel is safe.

ADAM SHAPIRO: And one of the things when he says that he thinks air travel is safe, Julie, is there was actually a study out of China about a flight in which 16 people were actually infected with COVID. Only one person from that flight contracted COVID traceable to the flight. The conclusion of that study is that flying on an airplane is actually very safe.

JULIE HYMAN: Very interesting. Your question about the middle seat is also interesting, right, and load factors. Because I wonder what that means for the fleet and what they're going to be doing with their-- I mean, are they going to retire some percentage of those planes if demand remains low? Because you would think they would also need more planes because they're preserving that space in the middle.

ADAM SHAPIRO: That's right. Well, they've already retired 10% of the fleet, just about. There was 960 planes assigned to Delta before the pandemic. They are completely putting out of service forever their MD-88s, their MD-90s, their 777s, and their 737-700s. So so far they've retired permanently about a hundred planes, with more to go.

The bottom line is that Delta is going to be a smaller airline post-pandemic, even when they hit that two or three-year recovery, than they were going into this. And a lot of it is because the business passenger, the business component of the airline model, of the business model, it's gone. And they're not sure how that's going to come back.