Delta Air Lines passenger planes are seen parked due to flight reductions made to slow the spread of coronavirus disease (COVID-19), at Birmingham-Shuttlesworth International Airport in Birmingham, Alabama, March 25, 2020.
Elijah Nouvelage | Reuters
Delta Air Lines is cutting in half the number of flights it planned to add next month as the coronavirus pandemic saps demand. The carrier posted a $5.7 billion net loss in the second quarter, its biggest since 2008.
The Atlanta-based airline planned to add 1,000 flights a day in August but will now add just 500. Demand has softened as new cases of coronavirus surge and states like New York tell arriving travelers to quarantine in an effort to stop the disease from spreading.
“Demand has stalled as the virus has grown, particularly down here in the South, across the Sun Belt, coupled with the quarantine measures that are going in place in many of the Northern states,” CEO Ed Bastian told CNBC’s “Squawk Box.” “Those two factors are causing consumers to pause.”
Delta slashed its daily cash burn to $27 million by the end of June from roughly $100 million a day at the end of March. The airline has said it wants to break even by the end of the year.
Bastian said Delta will likely have a similar cash burn in July and that it needs to see renewed confidence from customers willing to travel to further reduce that amount.
Airlines are among the industries hardest hit by the pandemic as worries over the virus and an unprecedented series of travel restrictions in the U.S. and abroad curtail travel. Carriers like Delta have parked hundreds of planes, slashed routes and encouraged tens of thousands of employees to take unpaid time off.
Delta’s revenue in the quarter ended in June fell 88% from a year ago to $1.47 billion, slightly higher than analysts’ estimates and roughly in line with the carrier’s forecast for a 90% drop. On an adjusted per-share basis, Delta lost $4.43, above the $4.07 per-share loss analysts forecast.
Shares were down 1.7% in premarket trading.
Delta and its competitors are now urging employees to take buyouts or early retirement packages as they scramble to reduce their payroll. They’re prohibited from laying off staff until Oct. 1 under the terms of $25 billion in federal coronavirus aid but have already started to warn employees about potential cuts.
Delta’s CEO Bastian told CNBC that he thinks the airline could largely avoid involuntary furloughs through these offers to employees.
Delta executives will hold a call with analysts at 10 a.m. ET.
Pilots talk as they look at the tail of an American Airlines aircraft.
Mike Stone | Reuters
The terms of $25 billion in federal coronavirus aid prohibit carriers from laying off workers or cutting their pay rates through Sept. 30, but weak demand has forced airlines to shrink to cut costs.
The Worker Adjustment and Retraining Notification Act requires employers to notify staff about possible layoffs or temporary furloughs generally 60 days in advance and it is not guaranteed that employees who receive these warnings will be laid off.
American has some 15,000 pilots and has already offered early retirement packages under an agreement with the Allied Pilots Association, their union.
“Our expectation is that WARN notices will be sent next week,” said Chip Long, American’s managing director of flight line operations, in a July 10 audio message, which was heard by CNBC. “Again, our hope is to very soon engage with APA and seriously explore every opportunity to take care of our pilots while taking care of our airline.”
The exact numbers of pilots who would receive the notices wasn’t immediately clear. American didn’t comment. Delta, for its part, has warned more than 2,500 pilots about potential furloughs, while United has told more than 2,200 of its pilots.
Fort Worth, Texas-based American earlier this month said it is overstaffed by about 20,000 people for its reduced fall schedule. That includes up to 8,000 flight attendants. Other work groups in addition to pilots are likely to receive WARN notices.
Airlines executives are urging employees to take buyouts and early retirement packages, but they have also warned they would have to turn to furloughs and job cuts if there aren’t enough volunteers.
United last week told close to 36,000 employees — nearly 40% of its workforce — that they could be furloughed.
Rivian R1T electric truck
Electric vehicle startup Rivian on Friday said it closed a $2.5 billion investment round led by funds and accounts advised by T. Rowe Price Associates as the company moves closer to production of an all-electric pickup and SUV.
Other participants in the round included Soros Fund Management, Coatue, Fidelity Management and Research Company as well as Baron Capital Group. Existing shareholders Amazon and funds managed by BlackRock also participated.
The funding comes as the company continues to renovate a former Mitsubishi plant in Normal, Illinoisto produce its vehicles as well as a line of EV vans, which Amazon pre-ordered 100,000 of last year for its delivery fleet.
In June, CNBC obtained correspondence regarding a funding round for Rivian, saying the company was raising at least $2 billion with a pre-money valuation at or above $8 billion. At the time, Rivian denied they were raising money.
“We often receive unsolicited investment offers from institutions and individual investors,” Amy Mast, public relations director at Rivian, said in a June 9 email. “We have heard this rumor ourselves – it is categorically false. Publishing this would be spreading a rumor that is simply not true.”
Mast declined to comment on her remarks Friday.
More recently, CEO and founder Robert “R.J.” Scaringe told CNBC the company was “open” to additional financing to help support its “aggressive growth plans.”
The would-be Tesla competitor raised $2.85 billion last year from Amazon, Cox Automotive, T. Rowe Price Associates and Ford Motor, among others. Rivian raised $1.3 billion in December, its most recent funding round and biggest capital raise last year.
Despite the coronavirus and ongoing recession, investors have shown high interest in electric automakers. Shares of Nikola Motor, which plans to make electric trucks, surged last month after going public through a reverse merger last month. Its market valuation is in-line with Ford, even though it doesn’t expect to generate revenue until 2021.
Rivian is expected to be among the first, if not the first, to bring an all-electric pickup to market early to mid- next year – potentially years ahead of its competitors, including Nikola, Tesla and General Motors.
Rivian is taking pre-orders for its all-electric pickup and SUV that include $1,000 refundable deposits.
Rivian, like Tesla, plans to sell its vehicles directly to consumers, bypassing franchised dealers that are used by “traditional” automakers such as GM and Ford.
A row of United Airlines passenger planes parked at gates at Denver International Airport in Denver, Colorado.
Robert Alexander | Getty Images
United Airlines on Wednesday said it is warning about 36,000 frontline employees — more than a third of its staff — about potential job cuts as the coronavirus pandemic continues to roil travel demand.
Federal law requires employers to give staff notice about possible layoffs or temporary furloughs 60 days in advance. United and other airlines that took $25 billion in federal payroll support are prohibited from laying off, furloughing or cutting the pay rates of staff until Oct. 1.
In a memo sent to employees Wednesday, United said just because workers receive a WARN notice it doesn’t mean they will definitely be furloughed and it said it will try to exhaust voluntary measures before cutting workers. Some of the workers may be called back to work but that will depend on a return to demand, which some industry executives say could take years.
United shares were down 2.2% after the announcement on potential furloughs, slightly lower than earlier in the session.
The furloughs would apply to unionized workers and warnings are going to some 15,000 flight attendants, more than half of the airline’s cabin crew and more than 2,200 pilots.
“The United Airlines projected furlough numbers are a gut punch, but they are also the most honest assessment we’ve seen on the state of the industry,” said Sara Nelson, a flight attendant for the airline and president of its labor union, the Association of Flight Attendants.
United, Delta and American and other airlines have been urging workers to take early retirements, buyouts and other voluntary measures as the carriers scramble to cut costs. But travel demand is a fraction of last year’s just as what is usually the peak summer travel season hits. That presents a bleak outlook for the industry, and voluntary measures may not be enough to reduce airlines’ costs to match weak demand.
United executives have said that despite a resurgence in past weeks, demand has started to slip, as new coronavirus cases rise and travel restrictions take effect.
United had about 96,000 employees as of the end of last year.
The airline is negotiating with its pilots’ labor union about early retirements, a United executive said.
Labor unions, including the flight attendants’ AFA, last month asked Congress to extend aid to support airline workers‘ jobs through the end of March.
Donald Trump leaves after a joint press conference with Mexican President Enrique Pena Nieto (out of frame) in Mexico City on August 31, 2016.
Yuri Cortez | AFP | Getty Images
President Donald Trump and his administration will discuss trade during a dinner with numerous executives from the U.S. and Mexico in conjunction with Mexican President Andres Manuel Lopez Obrador’s visit to Washington on Wednesday, CNBC has learned.
The attendees will include FedEx Chairman and CEO Fred Smith, UPS Executive Chairman David Abney, Intel CEO Bob Swan and Lockheed Martin CEO James Taiclet, according to a partial list obtained by CNBC. Executives from Sempra, Shell, Ford, Nucor and others are also slated to attend, according to the list.
The working dinner with business and political leaders – a rarity during the coronavirus pandemic – will focus on cross-border trade and the United States-Mexico-Canada Agreement, the revamped trade deal that Trump signed into law in January.
This is breaking news. Please check back for updates.
A customer wearing a protective mask shops at a Hennes & Mauritz (H&M) clothing store at Westfield San Francisco Centre in San Francisco, California, U.S., on Thursday, June 18, 2020.
Michael Short | Bloomberg | Getty Images
Desparate to keep their workers safe and their lights on, retailers reached out to the National Governors Association Monday, urging policymakers for their help in sending a strong and uniform message about social distancing and wearing a mask.
The letter from the Retail Industry Leaders Association comes amid a huge surge in coronavirus cases — with total cases in the U.S. doubling since mid-May — and an increasingly hostile backlash against facial coverings. Businesses, from retailers to movie theaters, have been faced with a patchwork of rules from state and local governments as they reopened their businesses. With no other choice, they have been attempting to implement their own mandates for face masks and also enforce them.
“Despite compliance from the majority of Americans, retailers are alarmed with the instances of hostility and violence front-line employees are experiencing by a vocal minority of customers who are under the misguided impression that wearing a mask is a violation of their civil liberties,” the retail group, whose members include Best Buy, Dollar General and Home Depot, wrote, in the letter, which was made public Tuesday. “Wearing a mask is not about fear, and it certainly should not reflect one’s politics.”
The Centers for Disease Control and Prevention recommends the use of facial coverings such as masks when it’s difficult to maintain a distance from other people, although there’s no federal order requiring people to do so.
Mask mandates, however, have increasingly become a debate, drawing criticism and in one instance, threats that led a top local health official in Southern California to resign. Even in states where masks are required when in public, workers are often called upon to enforce the policy in stores, bars and airplanes when customers arrive without them. Some instances have resulted in violence.
In the Van Nuys section of Los Angeles in May, before California required masks be worn by all residents outside their homes, a Target employee was punched by a customer who refused to wear a mask. The employee fell and broke his left arm, according to the Los Angeles Police Department. At a Dollar Tree in Michigan, a customer wiped his nose on an employee’s shirt after she advised him to wear a mask inside the store. And a security guard at a Family Dollar Store was fatally shot after a dispute broke out when he asked a customer who wasn’t wearing a mask to leave the store.
Many public health and infectious disease experts agree that masks have proven effective at preventing the spread of Covid-19. A statewide mandate is better than a local version because places where masks are required are controlling their outbreaks, and a statewide mandate unifies the messaging about their effectiveness, said Dr. Luis Ostrosky, a professor of infectious diseases at McGovern Medical School at UTHealth in Houston.
“I’m completely baffled as to why masking became such a political issue and such an ideological issue,” Ostrosky said. “We’ve never had a problem with no shoes, no shirt, no service. We’ve never had a problem with no smoking indoors.”
Proven to prevent spread
Scientists say the virus can spread through respiratory droplets that pass when an infected person coughs or sneezes and studies suggest face masks may serve as a helpful barrier.
“All politics aside, it’s clear from scientific and safety perspectives that wearing a mask reduces the likelihood of transmission of disease. Whether you’re Republican or Democrat, you breathe the same air and you exhale the same air,” said Dr. Betty Chu, associate chief clinical officer and chief quality officer at Henry Ford Health System in Michigan.
“I would say it’s pretty clear from a scientific perspective that wearing a mask reduces the transmission,” she said.
At first, the CDC didn’t advise the use of face masks, but that was before experts understood the extent at which people could spread the virus before the onset of symptoms, according to the Mayo Clinic. It also wasn’t known that some people who have Covid-19 and show no symptoms could unknowingly spread the virus.
“The evidence is conclusive that places that do better in masking have lower rates,” Ostrosky said. “And I think we’re experiencing the consequence of ambiguous, unclear messaging about masking.”
Mask mandates vary
In some cases, states without widespread orders have left the debate for municipalities and businesses to decide, including areas where cases are spiking, like Arizona and Florida.
In Texas, Gov. Greg Abbott has maintained that wearing masks would help the state’s economy remain open. He’s urged residents to cover their faces to prevent the spread of Covid-19, even if they felt like it would be an “infringement of freedom.” But until last week, when hospitals were starting to get hit with a wave of Covid-19 patients, he was reticent to require masks. Even when he did, the statewide mandate includes a large number of exceptions.
Other states such as Kansas have joined Texas in recent days to issue their own orders. But there are numerous holdouts. Nebraska Gov. Pete Ricketts, for example, has strongly opposed such efforts. He told local governments in June that they would not receive any federal money to help fight the effects of the coronavirus pandemic if they implemented mandates.
President Donald Trump‘s comments have helped to politicize the debate. In late June, he said in an interview with The Wall Street Journal that some Americans might wear face masks not as a way to prevent the spread of coronavirus but as a way to “signal disapproval of him.”
Last week, he said he would have “no problem” wearing a mask in some circumstances, but he continues to say it’s not necessary to make masks mandatory throughout the U.S.
And that’s likely why businesses are looking to the states for action.
Dr. Neal Jain, a clinical allergist and immunologist at San Tan Allergy and Asthma and director of research at Arizona Allergy and Immunology Research, was one of over hundreds of doctors in Arizona who signed a petition sent to the governor urging he sign a statewide mask mandate.
Gov. Doug Ducey initially didn’t allow local jurisdictions to implement their own face covering mandates but reversed that order on June 17. After the change, cities from Phoenix to Tucson adopted mask requirements.
“I think it is a public health 101 mandate that should be in place to protect all of our citizens from the potential ramifications,” said Jain, a member of the Committee to Protect Medicare.
An economic argument
Jan Hatzius, Goldman Sachs’ chief economist, has also made an economic argument for face masks after his team examined the link between the use of face masks and controlling Covid-19 cases. Hatzius said a national mandate could prevent lockdown orders and save the economy from taking a hit as businesses shut down.
Tilman Fertitta, the chairman and CEO of Houston-based restaurant giant Landry’s, touched on this argument as well as he urged U.S. residents to wear masks, saying it’s necessary to keep the economy open. Fertitta, whose business empire includes more than 600 restaurants and Golden Nugget casinos, said wearing a mask is, ultimately, about respect for others.
Some businesses have tried to stay neutral in the absence of government mandates with mixed results.
Walmart, requires its employees to wear face coverings but says its optional for customers, although they strongly encourage people to wear them. The company will remind customers whether there are local or statewide mandates requiring masks before entering the store, a spokesperson said.
Target instituted a similar policy, providing face coverings and gloves to employees on the job. The company has added signage and stationed team members outside stores to remind people to wear masks while shopping in areas where local governments are mandating residents to wear them, a spokesperson said.
But AMC was forced to reverse course. Initially, the movie theater chain decided that masks would be optional, saying the decision not to require masks was made in an effort to avoid politics, but it was soon met with an “intense and immediate outcry” from customers, AMC CEO Adam Aron said in a statement. It now will require all moviegoers to wear face coverings.
Lack of federal rules in air travel
The Trump administration last week released a series of guidelines for air travel in the Covid-19 era, saying travelers should wear masks and that airlines should inform travelers when social distancing isn’t possible. But the government stopped short of mandating masks in airports or flights. It also doesn’t require airlines to limit capacity on board and carriers’ policies have differed on that issue.
While there aren’t government mandates, all major U.S. airlines now require that passengers wear face coverings like masks on board, an effort to protect both customers and crews. There are some exceptions for those with medical issues, for very young travelers and when passengers are eating or drinking.
Not all passengers are complying.
A spokeswoman for budget carrier Frontier Airlines said law enforcement removed a passenger on Denver-bound flight before departure from Los Angeles last month for “refusing to comply with crew member instructions, including refusing to wear a face mask.”
American Airlines in June banned a traveler after he refused to wear a mask on board a Dallas/Fort Worth-bound flight from New York last month. He declined to tell CNBC why he didn’t want to wear a mask. American said it would allow him to fly again once masks are no longer required on board.
While travelers are required to follow crew member instructions, some industry members and lawmakers say federal rules would carry more weight than carriers’ own policies.
Delta Air Lines‘ CEO Ed Bastian told Axios in an interview that aired on HBO last month that a government mandate for masks for travelers would make the policy easier to enforce. The largest flight attendant and pilot unions in the U.S. have also called for federal mask requirements for passengers.
“Sadly, the Administration’s guidance is still just that – unenforceable and woefully inadequate recommendations,” said Sens. Edward Markey (D-Mass.) and Richard Blumenthal (D-Conn.) after the Trump administration published its guidelines last week. “We need federally enforceable mandates to keep the traveling public safe.”
The Department of Transportation cites CDC guidelines.
“The DOT and the [Federal Aviation Administration] expect the traveling public to follow airline crew directions and policies, which are in place for passenger protection and the health of air crews, and to take very seriously the precautions recommended by the CDC and the International Civil Aviation Organization,” the agency said in a statement.
Last month, Delta’s Bastian told staff that the airline would ban travelers who don’t comply with its rule.
“We take the requirement to wear a mask very seriously. Customers who choose not to comply with this or any other safety requirement risk losing their future flight privileges with Delta,” Bastian said an employee memo. “So far, there have thankfully only been a handful of cases, but we have already banned some passengers from future travel on Delta for refusing to wear masks on board.”
An Airbus SE A310-114 aircraft, operated by Delta Air Lines Inc., flies into San Diego International Airport (SAN) in San Diego, California, U.S., on Monday, April 27, 2020.
Bing Guan | Bloomberg | Getty Images
Five more airlines have reached agreements with the Treasury Department for the terms of billions in federal loans to help weather the coronavirus pandemic.
Covid-19 has devastated demand for air travel and sent U.S. carriers to their first losses in years.
Delta, United, JetBlue, Southwest and Alaska have signed letters of intent for the terms of the loans, the Treasury Department said Tuesday. Last week, it announced that American, Frontier, Hawaiian, SkyWest and Spirit had also struck agreements for the aid. The CARES Act, a $2.2 trillion coronavirus relief package passed in March, set aside $25 billion in loans for U.S. passenger airlines.
Airlines are grappling with spikes in coronavirus cases around the country as well as continued travel restrictions that will limit demand for flights to Europe and other destinations.
United told reporters last week that demand had started to “flatten out” recently after a resurgence in the early spring and summer.
“The major U.S. airlines play a vital role in our economy and are critical to domestic and international travel and commerce,” the Treasury Department said. “These airlines are among the companies most heavily affected by the disruptions to social and economic activity caused by the pandemic.”
The Treasury Department didn’t disclose the terms of each potential loan or the amounts and the agreements don’t necessarily mean that the carriers will tap them. Delta in April said it is eligible for a $4.6 billion loan while United in May said it could access $4.5 billion.
Airlines have also started receiving $25 billion in federal payroll grants that prohibit carriers from laying off or cutting the pay rates of their employees through Sept. 30. Airlines have warned that employees may start receiving as early as this month government-mandated advance notices about potential furloughs.
A Korean Air Airbus 380 is being towed to a gate at Los Angeles International airport.
Fabrizio Gandolfo | SOPA Images | LightRocket via Getty Images
Korean Air’s U.S. operation received millions in federal small-business loans aimed to soften the blow of Covid-19, federal data shows.
The carrier received between $5 million and $10 million in U.S. loans intended to help small businesses keep employees on their payrolls, according to a list of the largest recipients of loans in the Paycheck Protection Program released by the Trump administration on Monday.
The Seoul-based airline, South Korea’s largest, has about 500 employees in the U.S., and a spokeswoman said it applied for the loan because more than half of the carrier’s operation is suspended because of the pandemic.
The funds will be used toward it’s payroll costs for staff including those in its major cargo business as well as office jobs like marketing and human resources, the spokeswoman said.
Long-haul international travel has plunged because of Covid-19, as demand dried up and a series of travel restrictions has made trips abroad difficult if not impossible for some potential customers.
Korean Air is also a major cargo carrier with routes to or from the Americas comprising about 40% of its cargo sales.
Dara Khosrowshahi, CEO of Uber, speaking at the 2019 DealBook Conference in New York on Nov. 6th, 2019.
Photo: Mike Cohen
Nothing Uber does in food delivery can conceal a critical quandary facing the company — Covid-19 is wreaking havoc on its core business.
On Monday, Uber announced that it’s buying Postmates for $2.65 billion, weeks after failing to acquire larger rival GrubHub, which opted to take a bid from Europe’s Just Eat Takeaway. Uber said the Postmates deal will bolster its Uber Eats delivery unit, bringing in key markets like Los Angeles, Phoenix and Las Vegas and 10 million active customers.
With more consumers ordering food to their homes to avoid potential exposure to the coronavirus, Uber is tapping into a growing market where it already has a large presence. The problem for Uber is that those people are staying home, meaning they’re not taking rides to restaurants, bars, parties, concerts or to work. Even as the meal delivery business grew in the first quarter and the rides business declined, Eats still accounted for less than one-third of total gross bookings and rides made up 69%.
And with coronavirus cases growing in 36 states and hotspots like Texas and Florida tightening their restrictions on businesses and residents, Uber investors have reason for skepticism, particularly because so many companies have said they won’t be reopening their offices for the rest of the year. In a report last week, BTIG estimated that about 25% of Uber’s bookings for rides came from commuters.
“Our take is that the Street under-estimated exposure to commute rides and the fact that workers in key markets aren’t coming back anytime soon,” wrote BTIG’s Jake Fuller, who still recommends buying the stock.
Initially, investors seem happy with the Postmates deal. Uber’s stock rose 6% on Monday to $32.52 and is up 9.1% for the year, while the S&P 500 is down slightly in 2020. Uber said the combination will lead to more than $200 million in “run-rate synergies” within a year of close, a positive sign for Fuller and other analysts.
Uber shares this year
Michael Graham, an analyst at Canaccord Genuity, said in a report on Monday that the deal means 98% of the food delivery market in the U.S. will be controlled by Uber, GrubHub and privately held DoorDash. Graham is bullish because of “Covid-19 related tailwinds” and the “complementary geographic mix.”
Uber CEO Dara Khosrowshahi said in a call with investors after the transaction was announced that the rides business has bounced back a bit of late. After falling 75% in the second quarter from a year earlier, it’s now at less than a 60% decline from the prior year. Some countries are even seeing growth, he said. Meanwhile, Eats’ bookings more than doubled in the second quarter, and Postmates’ grew 67%, Uber said in its presentation.
“We’re in the unique position of having the Eats business to significantly offset headwinds in our rides business,” Khosrowshahi said.
It’s far from a total offset, however. Twice in May, Uber announced jobs cuts of at least 3,000 employees, leaving it with about 20,000, according to the latest available headcount figures. The company also said it would be shutting or consolidating 45 offices.
Additionally, Uber faces a lawsuit from California Attorney General Xavier Becerra, who alleged in May that Uber and ride-sharing rival Lyft have misclassified their drivers as contractors, violating a state law that went into effect this year. City attorneys from San Francisco, Los Angeles and San Diego joined Becerra in the lawsuit, which claims that the companies denied workers the right to overtime pay, disability insurance and other benefits.
Postmates, which says on its website that it has more than 1,000 employees, wasn’t exactly thriving before the coronavirus struck. The company laid off dozens of employees in December and closed its office in Mexico City. It had plans to go public, but was forced to reconsider after seeing investor response to Uber and Lyft and the near collapse of WeWork.
Uber expects the deal to close in the first quarter of next year. The company scrapped its guidance for this year in April, but analysts are projecting an 8% drop in revenue to just over $13 billion, according to Refinitiv. While analysts anticipate a reacceleration in 2021, that’s based on the assumptions that food delivery will continue to grow and that rides will also pick back up. Given the trajectory of the coronavirus in the U.S., that’s a pretty optimistic assumption.
An Uber spokesperson declined to comment.
WATCH: Uber buys Postmates