Delta Warns Recovery Could Take Two Years or Longer

Airlines have been slammed this year due to the coronavirus pandemic with Delta recently revealing that it could take two years or more for the company to see a recovery.

The airline reported that in the last two quarters it had lost over $11 billion and that it cut its cash burn to $18 million a day in September from $27 million at the end of the second quarter.

Third quarter revenue at $3.06 billion was below the $3.11 billion that analysts had expected and was down over 75% from the year ago quarter when it was $12.56 billion. Delta said its net loss was $5.4 billion in the third quarter, compared with a profit of $1.5 billion in the year-earlier period. An adjusted EPS of a loss of $3.30 was also bigger than the loss of $3.00 expected.

Delta’s president warned revenues may not normalize for “two years or more.” CEO Ed Bastian told CNBC’s “Squawk on the Street” that Delta has been seeing “real encouraging signs of improvement,” including interest in Thanksgiving and Christmas travel.

The airline has introduced enhanced cleaning procedures and other policies to calm travelers nervous about flying during the pandemic and leaves its middle seats open on flights.

Bastian said Delta would likely get its cash burn down to $10 million to $12 million a day in the fourth quarter. The carrier could break even and even turn cash-flow positive in spring 2021, he added.

“While our September quarter results demonstrate the magnitude of the pandemic on our business, we have been encouraged as more customers travel and we are seeing a path of progressive improvement in our revenues, financial results and daily cash burn,” Bastian said in the company’s earnings release for the quarter ended September 30th.

About 18,000 Delta employees, about a fifth of its pre-pandemic workforce, accepted buyouts and
early retirement packages, prompting a $3.1 billion restructuring charge.

To cut costs the carrier has also been retiring dozens of planes including its Boeing 767-300 ERs and 717-200s by 2025 and CRJ-200s by 2023.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.