Cash burn halved

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A Delta Air Lines plane lands at Los Angeles International Airport

Mario Tama | Getty Images

Delta Air Lines cut its cash burn in half in the fourth quarter and expects to be profitable this summer. This is a positive forecast after the coronavirus pandemic led the airline into its worst year ever.

Delta posted a net loss of nearly $ 12.39 billion in 2020 – a record and the Atlanta-based airline’s first annual loss since 2009.

Delta posted a net loss of $ 755 million for the fourth quarter compared to a profit of $ 1.1 billion a year earlier. Total revenue decreased 65% from $ 11.44 billion in the fourth quarter of 2019 to $ 3.97 billion. The company’s sales increased $ 441 million from the sale of third-party refineries. Adjusted, Delta posted a loss per share of $ 2.53, compared to analysts’ estimates of a loss of $ 2.50 per share.

However, the airline’s losses and cash consumption are on the decline, and the start of vaccine distribution has sparked optimism that travelers will return to heaven in the coming months.

The Delta share gained 3.5% in midday trading, outperforming the broader market.

The carrier’s cash burn averaged $ 12 million per day for the quarter ended December 31, halving the average cash burn of $ 24 million per day in the third quarter.

The airline will face tough months in the coming months, but is aiming for a recovery in 2021 as Covid vaccines are administered across the country, CEO Ed Bastian said.

“As our challenges continue into 2021, I am optimistic that this will be a year of recovery and a turning point that will result in an even stronger delta return to revenue growth, profitability and free cash generation,” said Bastian.

Delta expects sales for the first quarter of the year to drop 60% to 65% year over year, just as the pandemic began. That’s worse than analysts’ estimates for a 48% year-over-year decline.

The pandemic devastated demand for travel as concerns about the virus, quarantines, travel restrictions and breaks in business travel kept millions of potential customers home. The Transportation Security Administration examined only 324 million travelers last year, up from 824 million in 2019.

Most of the demand is still coming from vacation travel and is likely to remain so in the medium term, Delta executives said on a earnings call Thursday. This is a challenge for Delta as it relied heavily on business travelers prior to the pandemic. A recent survey found that 51% of Delta’s corporate customers believe their business travel will return to 2019 levels by 2023, and 40% said they will return by 2022, according to Bastian. The demand for business travel has increased, dominated by small and medium-sized businesses.

Here’s how Delta performed compared to Wall Street expectations for the quarter, based on average estimates made by Refinitiv:

  • Adjusted earnings per share: a loss of $ 2.53 versus an expected loss of $ 2.50
  • Total revenue: $ 3.97 billion versus expected $ 3.59 billion in revenue

Delta warned that the recovery will take time.

“The early part of the year will be marked by a troubled rebound in demand and a booking curve that remains compressed, followed by a tipping point and finally a sustained rebound in demand as customer confidence builds, vaccinations become widespread and offices reopen.” Delta President Glen Hauenstein said in the earnings release.

Delta announced it closed the fourth quarter with cash of $ 16.7 billion. Delta took on billions in debt last year, including a record $ 9 billion sale supported by the SkyMiles frequent flyer program.

The airline and its rivals are receiving additional federal funding to help weather the crisis. Congress approved additional $ 15 billion in state aid to airlines to pay workers late last year, on top of $ 25 billion in state salary support they received under the March CARES bill.

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