Delta Air Lines Reports First Quarter Loss of $422 Million on Revenue of $8.6 Billion
Delta Air Lines reported on Wednesday a first quarter adjusted pre-tax loss of $422 million or $0.51/share on total revenue of $8.6 billion. Total revenue was down 18 percent year-on-year, while total unit revenue declined 13 percent.
Today, Delta Air Lines reported a first quarter adjusted pre-tax loss of $422 million or $0.51/share versus Q1 2019 on an 18% total revenue decline to $8.6 billion. Expenses during the quarter decreased by $450 million on lower fuel costs which were partially offset by higher revenue and capacity related expenses. Cost per available seat mile – excluding fuel (CASM-Ex) increased 9 percent versus the same quarter last year. Fuel costs for the quarter decreased 19 percent year-on-year with an average cost of $1.81/gallon, which included a $29 million benefit from the company owned refinery. Delta Air Lines ended the first quarter with $6.0 billion in unrestricted liquidity. In Wednesday’s announcement, Delta Air Lines’ Chief Executive Officer, Ed Bastian said,
“These are truly unprecedented times for all of us, including the airline industry. Government travel restrictions and stay-at-home orders have been effective in slowing the spread of the virus, but have severely impacted near-term demand for air travel, reducing our expected June quarter revenues by 90 percent, compared to a year ago. Delta is taking decisive action to prioritize the safety of our employees and customers while protecting our business and bolstering liquidity. I am especially proud of the incredible work the Delta people are doing to keep our nation’s airways open, playing an active role in the fight against the virus. I would like to thank the President, members of Congress, and the Administration for their bipartisan support of the Payroll Support Program under the CARES Act, which recognizes the important role the airlines play in the U.S. economy. The Payroll Support Program will help safeguard Delta jobs while positioning our nation for recovery.”
Delta is carefully managing expenses during the crisis and expects a second quarter decline in expenses by around 50% or $5.0 billion on reduced capacity, lower fuel costs and a variety of cost reduction initiatives. The company has parked over 650 aircraft, consolidated airport facilities (including temporary concourse and Delta Sky Club closures), initiated a company-wide hiring freeze and offered voluntary leave options. To date, 37,000 Delta team members have agreed to take short-term unpaid leave. Additionally, pay reductions have been implemented for executive management and work schedules have been reduced across the company.
The carrier’s top priority remains preserving cash and enhancing liquidity. Since early March, Delta has raised $5.4 billion in capital including a $3.0 billion secured term loan, closing $1.2 billion in aircraft sale leasebacks and issuing $1.1 billion in AA, A, and B tranches of their 2020-1 Enhanced Equipment Trust Certificates (EETC). Additionally, the company has funded $150 million in private aircraft mortgages and has drawn down $3 billion in existing revolving credit facilities. Planned CAPEX has also been reduced by more than $3 billion and the carrier is negotiating with aircraft and equipment OEMs to optimize the timing of future aircraft deliveries, deferring aircraft modifications and refreshing ground service equipment.
As previously announced, Delta Air Lines will receive $5.4 billion from the U.S. CARES Act including a Payroll Support Program (PSP) grant of $3.8 billion and a $1.6 billion ten-year low interest loan. In return, the U.S. Treasury has received warrants to purchase over 6.5 million shares of Delta common stock at a strike price of $24.39 with a 5-year maturity. Also commenting on today’s announcement, Delta’s Chief Financial Officer, Paul Jacobson added,
“With the significant impact of COVID-19 on Delta’s revenue, we were burning $100 million per day at the end of March. Through our decisive actions, we expect that cash burn to moderate to approximately $50 million per day by the end of the June quarter. The decade of work we put into the balance sheet to lower debt and build unencumbered assets has been critical in our success in raising capital and we expect to end the June quarter with approximately $10 billion in liquidity.”
Source: Delta Air Lines