Delta posts staggering Q3 loss as coronavirus hits demand, layoffs mount
Delta Airlines (DAL) reported another staggering quarterly loss on Tuesday as the coronavirus pandemic continues to depress demand, causing major airlines to lay off thousands of workers.
During the third quarter, the airline lost nearly $ 5.4 billion, or $ 6.9 billion before tax, after a profit of over $ 1 billion in the same period last year. It underscored what CEO Ed Bastian described as "the extent" of the coronavirus pandemic in the carrier's business.
Here are the key findings of the report compared to the consensus estimates produced by Bloomberg:
Total operating income: $ 3.1 billion versus $ 3.1 billion expected
Adjusted loss per share: $ 3.30 versus $ 2.97 expected
Adjusted pre-tax loss: $ 2.6 billion
Adjusted Net Income Loss: $ 2.09 billion versus $ 1.87 billion expected
Delta increased its adjusted revenue to $ 2.6 billion in the third quarter, compared to $ 1.47 billion in the second quarter. The daily average cash burn dropped to $ 24 million and was just $ 18 million in September.
Prague, Czech Republic - June 27, 2012: A Delta Air Lines Boeing 767 takes off from PRG airport.
Airlines have slashed flight schedules and laid off staff to deal with the impact of COVID-19 on travel. In a statement, Bastian said: "The actions we are now taking to take care of our employees, simplify our fleet, improve customer experiences and strengthen our brand will enable Delta to accelerate a recovery from COVID. "
Bastian added, "We have been encouraged as more and more customers travel and we see a way of gradually improving our income, financial results and daily money consumption."
Even so, Delta’s revenue is 79 percent year-on-year and passenger capacity is down 63 percent. Delta announced it closed the quarter with $ 21.6 billion in liquidity as the airline embarked on what it called the Foundation for Recovery.
Delta cut its salaries and benefits spending by 32% as 18,000 employees took early retirement packages and thousands more opted for voluntary unpaid leave and working hours.
This has allowed Delta to avoid layoffs until the end of the year, while other airlines, United (UAL) and American (AAL), employed more than 32,000 people.
Airlines report revenue
United Airlines will ring after the bell on October 14th and hosts will call on the 15th
Southwest Airlines reported before the bell on October 22nd
American Airlines reported before the bell on October 22nd
Headwind in the industry
The aviation industry's recovery is slower than initially expected when Congress passed the $ 2.4 trillion Aid, Assistance and Economic Security Act (CARES) last March. It contained billions of dollars for the airlines under the Payroll Support Program. Airlines are campaigning for Congress to extend the PSP by an additional $ 20 billion as the downturn associated with the pandemic keeps the industry and its profits on the ground
"Overall, we believe the estimates for 2021 must be lower due to the slower-than-expected recovery," Cowen Equity Research analyst Helane Becker told clients in a recent statement.
Becker's team cites the improvement in data showing that leisure and family travel is recovering and passenger traffic is increasing.
The TSA reported that the number of people going through security checkpoints at the country's airports has fallen 65% since last week, year over year. This is an improvement on June when they were down almost 81%. "However, business traffic has decreased by 90% - 95%," writes Becker. "And without her return, we believe it will be difficult to break even before 2H21."
Delta President Glen Hauenstein admitted airlines are struggling to move forward, saying the slow and steady surge in demand may take two years or more before we see a normalized sales environment. According to Hausten, however, Delta creates the basis for "sustainable future sales growth".
Adam Shapiro is a co-host of Yahoo Finance's On the Move.
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