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Delta May Go Slow on Capacity Increases for the Rest of 2020

Zacks Equity Research

While Delta Air Lines DAL expects to increase capacity by about 1,000 flights in July and August, the trend might not continue for the rest of the year as a resurgence of COVID-19 in parts of United States begins to surface.

In an internal memo on Thursday, Delta’s CEO Ed Bastian stated that beyond August, there might not be many more flight additions through the remainder of the year.

With modest uptick in passenger numbers since May, U.S. airlines have been adding back some capacity. Those plans might get hampered, given the recent spurt in coronavirus cases in some states.

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Delta Air Lines, Inc. Price

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Effective Jun 25, Delta resumed flights between Seattle and Shanghai-Pudong via Seoul-Incheon, operating twice a week. From July onward, it will operate flights once a week from Seattle and Detroit, also via Incheon.

Two weeks into the summer travel season, Delta has been seeing a slow but steady increase in passenger volumes, per Bastian. However, overall demand is expected to be only 25% of last summer's revenues.

Bastian reiterated that given the current demand scenario, the airline is “at least two years away from a return to normal.”

Zacks Rank & Key Picks

Delta carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are Scorpio Tankers Inc. STNG, Teekay Tankers Ltd. TNK and Frontline Ltd FRO. While Scorpio Tankers and Teekay Tankers carry a Zacks Rank #2 (Buy), Frontline sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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