Delta Reports First Quarterly Loss In Five Years

By: Ben Schlappig

Published: April 22, 2020

10 comments

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.

In this post:

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

Bottom line

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?

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AlexS Diamond

April 23, 2020, 2:12 am

@khatl -- Science is definitely on his side. Multiple studies now, the most recent from Stanford, are saying that the real # of infected people is easily 50-85x the known number of cases now. 20,000 positive x 50 = 1,000,000 positive cases. If that's the case, CFR = 0.0846% 20,000 positive x 85 = 1,700,000 positive cases. If that's the case, CFR = 0.0498% For reference the common seasonal flu has a CFR of ~ 0.2%-0.25%. Some other food for thought: A study in Germany also reached a similar conclusion of actual cases being ~50x known cases. Deaths (overall) for the USA have been falling somewhat dramatically since Jan 1st. 59,000 people a week were dying the first week of January. Last week only 28,000 people died (I think this is an anomaly in the data, as the two weeks prior to that were 49,000 and 52,000 respectively) GA's number of new cases has dropped to pre-lockdown (mid-March) levels and continues to do so. GA's deaths work out as: Average: 72.8 years old, Mode: 73 years old, Median: 74 years old. Perhaps it would be prudent for those who are most vulnerable to avoid going out in public as much as possible (which is good advice during any flu season, period). Sweden didn't close down at all. Restaurants are still open, schools are still in session. People are being cautious, but no lockdowns. Now they're talking about possibly reaching herd immunity in the next 2-3 weeks. No need to wait for a vaccine at that point. Grocery store / hardware store / warehouse store workers are exposed to a huge number of people these days due to them being the only stores open, reduced hours (increasing density of customers), customers going to multiple stores in search of hard-to-find-items, etc. Lots of high-contact/high-touch interactions with things other people have touched. Yes, some have tested positive, but very, very few considering how much exposure they have and how many workers there are.

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SuperKooter Guest

April 22, 2020, 10:34 pm

@khatl and those people are being ignorant since Sweden hasn't shut down and has the same death rate. The lockdowns are pretty much worthless.

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khatl Diamond

April 22, 2020, 12:03 pm

@joey - while Kemp has decided to say he's reopening Georgia, everyone there isn't exactly with him on that. For some weird reason, some people in Georgia are saying that a 4% death rate on 20,000 cases (https://www.ajc.com/news/state--regional/coronavirus-georgia-the-latest-figures/HXfoEnBqHW7i0AJpYArL0J/) means they value their life more than opening their business. Go figure!

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Andrew Gold

April 22, 2020, 11:27 am

@Lucky - Delta’s last quarterly loss was Q4 of 2014, not Q1 of 2011. May want to adjust the headline to reflect.

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Eskimo Guest

April 22, 2020, 11:11 am

I was expecting a bit worse from Delta. However, we still don't see AA or UA full numbers yet. All I can say so far UA is doing much worse. Trying to raise cash through equity (before they can't) isn't a good sign. With DL numbers they seem to be able to stay in business till end of the year, UA might be less than that. But that doesn't mean any of the airlines won't file Chapter 11 sooner.

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