Most US airlines are reporting their first quarter earnings (or lack thereof) before the end of the month. On Monday we learned about United Airlines’ $2.1 billion first quarter loss, and now Delta Air Lines has reported their first quarter results.
Delta Air Lines reports $534 million loss
Delta Air Lines has reported a $534 million loss for the first quarter of 2020, compared to a $730 million profit for the first quarter of 2019. This represents Delta’s first quarterly loss since the fourth quarter of 2014.
For the quarter, Delta’s operating revenue fell by 18%, to $8.59 billion. It’s really only in the last couple of weeks of March where things got really bad for Delta, as the airline started burning through $100 million per day due to operating so many empty flights.
While it feels like we’ve been sheltering in place forever, data shows that passenger traffic in the US really only started decreasing materially as of early March (this is based on the number of travelers passing through TSA checkpoints):
- On March 1, passenger traffic was roughly comparable to last year (within 1%)
- On March 16, passenger traffic was less than half compared to the same day last year
- On March 26, passenger traffic was less than 10% compared to the same day last year
- On April 5, passenger traffic was less than 5% compared to the same day last year
Delta reported a $534 loss in the first quarter
Delta Air Lines’ second quarter projections
The second quarter is going to be way worse for airlines than the first quarter, given that demand is expected to be virtually non-existent for the entire period:
- Between April and June, Delta is cutting capacity by about 85%, including an 80% cut for domestic flights and a 90% cut for international flights
- Delta expects revenue to be down 90% in the second quarter
- By the end of June, Delta is expected to burn through “just” $50 million per day in cash, rather than $100 million, thanks to pay reductions, unpaid leave, and more
- Total expenses are expected to decline by about 50% in the second quarter, or by about $5 billion
- Between cost-saving measures and raising capital, Delta expects to end the second quarter with $10 billion in liquidity, compared to $6 billion of liquidity in March
Expect losses in the second quarter to be much bigger
There’s nothing terribly surprising here. The $534 million loss for Delta is about a quarter of United’s loss, though in fairness United’s loss included a lot of special expenses.
Given the severity of the situation, Delta seems well positioned to weather this, as the airline plans to end the second quarter with more liquidity than they have now. That being said, I can’t even begin to imagine how much money the industry will be losing in the second quarter…
How do Delta’s results compare to what you were expecting?