Paul Jacobson, the CFO who breathed life back into Delta Air Lines following its 2007 bankruptcy, announced Tuesday he is holding off on his retirement. Jacobson joined the Atlanta-based airliner in 1997, and became CFO in 2012.
The announcement comes as Delta, along with other air carriers, adjusts operations as they undergo catastrophic losses, with Delta expecting a 90% revenue drop over the fiscal year.
"Paul's experience and guidance have been critical to Delta's initial response to the COVID-19 crisis," Delta CEO Ed Bastian wrote in a memo to employees. "Under his leadership, we have boosted our liquidity through commercial markets and expanded our cash position to help us weather the storm in the months to come."
Bastian said, in the February memo, that finding Jacobson’s replacement would be a months-long process. He did not specify whether Jacobson's departure is related to the budding coronavirus outbreak. He will stay with Delta in an advisory position until they name a successor, the company said.
Jacobson planned to depart at a difficult time for Delta, as well as for the global air travel industry. The next CFO would have been tasked with managing the financial fallout from the coronavirus outbreak, which is "disrupting air travel world-wide and could become a drag on earnings and cash flow," The Wall Street Journal said in early March.
Pre-pandemic, 5,000 Delta flights departed each day. Following travel restrictions announced by the U.S. Health and Human Services, Delta service between the U.S. and Shanghai and Beijing has been suspended until April 30.
Similarly, following CDC guidance that recommended travelers avoid nonessential travel to Seoul, Delta announced last week a service reduction between the U.S. and South Korea.
After the CDC issued the same warning for Italy, Delta made the same call. On Sunday, the airline announced a temporary suspension of its daily flight between New York’s John F. Kennedy International Airport and Milan’s Malpensa Airport, effective through May 1.
Delta's summer seasonal service between JFK and Venice, previously scheduled to begin April 1, will now begin May 1, the company said.
The sum of these announcements will likely result in a drop in earnings and profits for Delta, which would otherwise be enjoying a profitable 2020, in part because it doesn’t fly Boeing 737 MAX planes, which remain grounded.
Against this backdrop, Delta’s new CFO would have had a full plate right from the start. The person's focus will be on "managing the company’s liquidity to compensate for a potential decline in bookings while covering fixed expenses for staff, fuel and other items," S&P Global Managing Director Philip Baggaley told The Wall Street Journal.
Presently, Delta is stronger financially than its closest domestic rivals, American Airlines and United. The company’s total debt at the end of 2019 was $18 billion, compared to $20.5 billion at United and $33.4 billion at American, according to the Journal.
It remains to be seen how quickly the virus will spread, or whether it will be comparable to previous viral outbreaks, including MERS, SARS and H1N1. Despite efforts to contain the virus domestically, cases are spreading across the country. As of Monday morning, 88 domestic cases have been reported.
Baggaley told the Journal that Delta’s new CFO will likely look to follow the company’s current financial strategy, which includes a focus on "investment-grade rating, generating free cash flow and returning money to shareholders."