Delta declares March Quarter 2021 financial results

[By VICTOR NZE]

United States based-carrier, Delta Air Lines has reported financial results for the March quarter 2021 and provided its outlook for the June quarter 2021.

The airline declared GAAP pre-tax loss of $1.5 billion and loss per share of $1.85 on total revenue of $4.2 billion. Also, the company recorded adjusted pre-tax loss of $2.9 billion and adjusted loss per share of $3.55 on adjusted operating revenue of $3.6 billion for the same period under review.

“A year after the onset of the pandemic, travelers are gaining confidence and beginning to reclaim their lives. Delta is accelerating into the recovery with our brand stronger and more trusted than ever before,” said Ed Bastian, Delta’s chief executive officer.

Continuing, Bastian said: “Thanks to the incredible efforts of our people, we achieved positive daily cash generation in the month of March, a remarkable accomplishment considering our middle seat block and the low level of demand for business and international travel. If recovery trends hold, we expect positive cash generation for the June quarter and see a path to return to profitability in the September quarter as the demand recovery progresses.”

Detailed March Quarter Financial Results show: Adjusted pre-tax loss of $2.9 billion excludes $1.2 billion of benefit related to the first payroll support program extension (PSP2), which is partially offset among other items by the debt extinguishment charges incurred when prepaying our $1.5 billion slots, gates and routes term loan;

Adjusted operating revenue of $3.6 billion declined 65 percent on 55 percent lower sellable capacity versus March quarter 2019;

Total operating expense, which includes the$1.2billion benefit related to PSP2, decreased $3.9 billion over the March quarter 2019.Adjusted for the benefit related to PSP2 and third-party refinery sales, total operating expense decreased $3.1 billion or 33 percent in the March quarter compared to March quarter 2019, driven by capacity- and revenue-related expense reductions, lower salaries and related costs and strong cost management across the business;

During the March quarter, cash burn averaged $11 million per day and turned positive in the month of March with cash generation of $4 million per day;

At the end of the March quarter, the company had $16.6 billion in liquidity, including cash and cash equivalents, short-term investments and undrawn revolving credit facilities.  The company had total debt and finance lease obligations of $29.0 billion with adjusted net debt of $19.1 billion, which was higher than prior guidance as a result of aircraft financing decisions.

For the June Quarter 2021 Outlook, Glen Hauenstein, Delta’s president, said: “Recent demand trends are encouraging with rising confidence in air travel as vaccination rates improve and travel restrictions ease, with current domestic leisure bookings 85% recovered to 2019 levels.

“In the June quarter, we expect significant sequential improvement in revenue as leisure demand accelerates into the peak summer period and we add capacity efficiently with the removal of our seat block May 1 with revenues recovering to 45 to 50 percent of 2019.”

Delta’s adjusted operating revenue of $3.6 billion for the March quarter was down 65 percent compared to the March quarter2019, a four-point sequential improvement from December quarter 2020.  Passenger revenues declined 70 percent in the March quarter 2021 compared to March quarter 2019 on 55 percent lower sellable capacity as Delta was the only carrier to continue blocking middle seats.

Domestic passenger revenues were down 66 percent versus March quarter 2019, but up more than five-points in comparison to the preceding quarter’s results driven by leisure demand. International passenger revenue remains limited at down 81 percent compared to March quarter 2019, driven by continued travel restrictions.

For the month of March, passenger revenue was 50 percent higher than February, nearly 15-points better than normal seasonality trends driven by momentum in leisure demand.  Net cash sales, defined as tickets purchased less tickets refunded, doubled from the month of January to the month of March and are continuing to improve. Corporate demand declined 80 percent versus the March quarter 2019. The corporate recovery showed signs of improvement during the quarter with March volumes improving relative to February at a rate twice the normal seasonal growth between the two months.

Non-ticket revenues outperformed passenger revenues, with cargo revenues up 12 percent versus the March quarter 2019 and total loyalty revenues down 48 percent. American Express remuneration declined 23 percent over the same period as card spend continues to recover faster than passenger traffic.

On Cost Performance, Gary Chase, Delta’s interim co-chief financial officer, said: “I’m pleased with how the team came together to deliver for each other and our customers, while producing great cost performance.  As the recovery begins to take root, I’m excited to see our focus shift from stabilizing the company’s financial position to creating value by returning to profitability, generating cash and restoring our balance sheet.

“We expect to narrow our June quarter adjusted pre-tax loss to $1 to $1.5 billion, with progressive improvement to a breakeven result for the month of June.”

On the Balance Sheet, Cash and Liquidity, Chase added: “With our cash flow and earnings close to inflection, we have begun our journey of de-levering.

“By the end of the June quarter, we will have reduced financial obligations by nearly $10 billion in a combination of paying down debt and accelerating pension funding since last fall. This reflects an unprecedented turnaround in the health of our pension plans over the last decade, securing the future of our retirees.”

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