UPDATED: Delta posts $940 million Q1 loss, but sees strong recovery underway

Travelers are seen at Hartsfield-Jackson airport in Atlanta on Friday, April 8, 2022.   (Arvin Temkar / arvin.temkar@ajc.com)

Credit: arvin.temkar@ajc.com

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Travelers are seen at Hartsfield-Jackson airport in Atlanta on Friday, April 8, 2022. (Arvin Temkar / arvin.temkar@ajc.com)

Credit: arvin.temkar@ajc.com

Carrier hires thousands amid surging demand, but fuel costs, COVID-19 remain challenges.

It isn’t every day that one of Atlanta’s biggest companies reports being in the red, but at the same time gives investors, employees and observers of the broader economy a glimmer of hope.

Tucked into Delta Air Lines’ first quarter financial statement, in which the carrier posted a $940 million net loss, were some positive signs amid a global economy still stricken by COVID-19, inflation and a brutal Russian invasion of Ukraine. The combination of omicron and higher fuel costs stung Atlanta-based Delta in the first three months of the year, and the pandemic and geopolitical tensions remain threats, but the airline still expects to be profitable the rest of 2022.

The past two years have been among the most challenging ever for the travel industry. Airlines slashed flights and jobs and limped along with the help of billions in pandemic rescue funds when travel ground to a halt.

But some of Delta’s reported first quarter loss stems from soaring personnel costs for hiring thousands to accommodate surging demand as business and leisure travelers take to the skies.

Delta CEO Ed Bastian said the airline has seen “a strong rebound in demand as omicron faded,” allowing the airline to turn a profit in March, even though results for the full quarter amounted to a loss.

“Sales for the last five weeks have been the highest level in our company’s history,” Bastian said in an interview with The Atlanta Journal-Constitution. And “there’s still no signs of pulling back.”

Combined ShapeCaption
Travelers are seen at Hartsfield-Jackson airport in Atlanta on Friday, April 8, 2022. (Arvin Temkar / arvin.temkar@ajc.com)

Credit: arvin.temkar@ajc.com

Travelers are seen at Hartsfield-Jackson airport in Atlanta on Friday, April 8, 2022.   (Arvin Temkar / arvin.temkar@ajc.com)

Credit: arvin.temkar@ajc.com

Combined ShapeCaption
Travelers are seen at Hartsfield-Jackson airport in Atlanta on Friday, April 8, 2022. (Arvin Temkar / arvin.temkar@ajc.com)

Credit: arvin.temkar@ajc.com

Credit: arvin.temkar@ajc.com

People are traveling more for meetings and conferences, with domestic corporate sales were about 70% recovered in March, the airline said, while international corporate sales were 50% recovered.

Delta president Glen Hauenstein said the airline’s top corporate accounts have removed their domestic restrictions on business travel.

The rebound in travel, particularly on domestic flights, helped push Hartsfield-Jackson International Airport, where Delta operates its largest hub, back to being the world’s busiest airport.

“Our restoration is really focused on where the demand is healthy,” Bastian said. “Atlanta has been healthy.”

That’s not to say this is all good news for consumers.

Airlines have been raising fares as demand increases and fuel costs rise. Domestic air fares are averaging $330 for a round trip, up 40% from the beginning of the year, according to a report from travel app Hopper.

If you're looking for lower fares, you have to be flexible as to which days you're willing to fly.

- Delta president Glen Hauenstein

Delta reported $9.35 billion in revenue in the quarter ended March 31, more than double its revenue from first quarter last year. However, it’s still below the company’s first quarter 2019 revenue of $10.47 billion, before the pandemic.

Delta said passenger revenue was 25% lower than pre-pandemic levels, offset by growth in cargo and other revenue, including sales of frequent fliers miles to credit card partner American Express.

While the company’s cargo revenue has grown as air freight rates increase, “the one caution I have right now is the closure of China,” Hauenstein said. He said Delta has suspended flying to China with the COVID-19 lockdown of Shanghai, “so that’s going to weigh a little bit on cargo revenues” until a reopening.

Delta had quarterly operating expense of $10.13 billion, up 83% from first quarter last year and above pre-pandemic first quarter 2019.

The airline’s largest expense, labor costs, was up 28.3% year-over-year. During the pandemic, the company slashed its payroll through buyouts and early retirements, then had to quickly ramp up staffing as travel recovered.

Bastian said the company has hired nearly 15,000 people since the start of 2021 and expects to hire roughly 1,000 more to prepare for the summer rush.

There's a shift going on within consumer spending from purchasing of goods to purchasing of services. ... People are looking for experiences.

- Delta CEO Ed Bastian

Aircraft fuel expense, the company’s second largest cost, doubled compared with a year earlier to about $2.09 billion, with the airline paying higher fuel prices and flying more. Bastian said Delta’s Pennsylvania oil refinery helped to reduce the airline’s fuel costs by about $50 million in the quarter.

For the second quarter, Hauenstein said revenue will reach 93% to 97% of pre-pandemic levels, with 84% of flight capacity restored. There’s a potential to restore 100% of flight capacity by the end of this year, according to the airline, which has been slower to add flights back than other carriers.


Delta’s revenue, by region

First quarter revenue, capacity compared with pre-pandemic first quarter 2019

Domestic

$5.56 billion, capacity down 7%

International

Atlantic: $539 million, capacity down 33%

Latin America: $680 million, capacity down 12%

Pacific: $125 million, capacity down 69%

Source: Delta Air Lines