Delta reports another loss but sees jump in leisure travel
Delta Air Lines reported another quarterly loss Thursday, but pointed to an expected return to profitability later in 2021 amid quickly rising travel demand.
The big US carrier was cashflow positive in March for the first time since the coronavirus pandemic hit a year earlier as more newly-vaccinated Americans booked vacations.
“We are now seeing more normal booking behavior as customers make plans for spring and summer travel,” Delta Chief Executive Ed Bastian said in a conference call, adding that 75 percent of customers expect to be vaccinated by Memorial Day.
The company reported a loss of $1.2 billion in the first quarter, compared with $730 million in profits in the comparable period of 2020. Revenues were down 60 percent at $4.2 billion.
Delta expects a smaller loss in the second quarter “and we see a path to returning to profitability in the September quarter,” Bastian said.
Delta plans to resume booking its middle seats in May, which will boost revenues at a time of rising demand and broadening deployment of Covid-19 vaccines.
Company officials said they already are seeing a strong recovery in vacation bookings, with leisure travel now 85 percent recovered compared to 2019 levels.
But the comeback in corporate travel has been far more tepid, and volumes last month stood at 20 percent recovered, compared with 15 percent at the end of 2020.
Delta executives said they had yet to see airport crowding problems at popular travel spots and have not experienced the labor shortages seen elsewhere in hospitality.
But if the industry recovery continues to accelerate, Delta may start hiring additional pilots or flight attendants by the end of the year, executives said.
Shares of the airline fell 3.9 percent in afternoon trading.
(Reuters) – Delta Air posted a bigger-than-expected loss for the first quarter on Thursday, hurt by lower average fares, while also forecasting a return to profitability later this year as more people get vaccinated and start traveling again.
Shares of Delta fell 3.7% in morning trade, as the company also said the average fuel price per gallon jumped 30% in the first quarter from the previous three months.
Air travel, stifled by the COVID-19 pandemic, is widely expected to rebound in the second half of 2021 as more people travel for leisure rather than business, likely limiting airlines from raising fares dramatically.
“As we head into the summer, we believe that the real pressure on domestic yields will come primarily from the lack of business travel,” Delta President Glen Hauenstein said on a call with analysts.
“To progress to the next leg of the recovery, we need corporate travel to return in earnest,” Hauenstein added.
Average fares dropped 14% in the first quarter ended March 31 from the fourth quarter, while the average fuel price per gallon rose to $1.87 from $1.45.
It also expects adjusted June-quarter revenue to fall between 50% and 55% from two years ago, with the midpoint of the outlook at $5.94 billion, below Wall Street’s estimate of $6.22 billion, according to IBES data from Refinitiv.
Delta said it hopes that the U.S.-UK travel corridor will open in early summer, likely aiding a profitable third quarter.
“The recovery still has a long way to go…and costs, notably oil, are on the rise,” Third Bridge analyst Peter McNally wrote in a note.
Total operating revenue fell 60.4%, while adjusted net loss was $2.26 billion, or $3.55 per share.
Analysts on average had estimated a loss of $3.17 per share on revenue of $3.91 billion.
Delta’s June-quarter adjusted pre-tax loss is expected to narrow to between $1 billion and $1.5 billion.
(Reporting by Praveen Paramasivam, Ankit Ajmera and Shreyasee Raj in Bengaluru; Editing by Devika Syamnath and Bernard Orr)