UPDATE: Delta turns corner, generates cash after burning through it

A sign reading, 'masks required in this area,' is seen as travelers prepare to check-in for their Delta Air Lines flight at the Miami International Airport on Feb. 1, 2021 in Miami, Florida.  (Joe Raedle/Getty Images/TNS)
A sign reading, 'masks required in this area,' is seen as travelers prepare to check-in for their Delta Air Lines flight at the Miami International Airport on Feb. 1, 2021 in Miami, Florida. (Joe Raedle/Getty Images/TNS)

Credit: TNS

Credit: TNS

But 1Q revenue was still down 60% from 2019

Delta Air Lines has turned a corner as it starts filling middle seats again next month and spies a travel rebound this summer.

The Atlanta-based airline reached a key milestone in March, when bookings doubled from January and turned the company cash-flow positive for the first time in roughly a year.

Air travel has started to bounce back this spring as more Americans get vaccinated after the pandemic sent traffic plunging. Travelers also are booking tickets for future trips. The Centers for Disease Control and Prevention recommends delaying travel until you are fully vaccinated, but says those who are can safely travel within the U.S.

“We are confident that we’re in a real recovery phase,” said Delta CEO Ed Bastian in an interview with The Atlanta Journal-Constitution.

Delta on Thursday reported a net loss of $1.18 billion for the first quarter of the year, burning through $11 million in cash a day.

But that changed in March when the airline instead generated about $4 million in cash a day.

It suggests Delta is pointed toward financial recovery after losing a record $12.4 billion last year, when many of its planes and workers were idled.

Bastian said 75% of the airline’s customers indicate they expect to be vaccinated by Memorial Day. The airline’s domestic leisure bookings have recovered to 85% of 2019 levels, before the pandemic wreaked havoc on the airline industry.

If the recovery continues to gain strength before the end of the year, Delta could look to start hiring flight attendants and pilots again, he added.

A rebound in air travel would be good news for Georgia’s economy. Delta is among the largest employers in the state. Atlanta’s Hartsfield-Jackson International Airport, the country’s busiest airport, is a major generator of revenue and jobs.

ExploreAAA: More Georgia residents willing to travel as vaccinations expand

Still, the company’s first-quarter revenue of $4.15 billion was down 60% compared with the like period in 2019. That includes a 70% decline in passenger revenue offset by increased cargo and other revenue.

And Delta expects its seat capacity in the April-June quarter will still be down about 40% from 2019 levels, with revenue down 50-55%.

Delta is the last remaining U.S. airline to block middle seats amid the pandemic. It still plans to end that policy May 1, despite a CDC study Wednesday indicating that keeping middle seats empty on planes could sharply reduce exposure to the coronavirus.

“I believe it to be safe to sit in the middle seat,” said Bastian, adding that the study didn’t fully account for measures like masks.

Delta President Glen Hauenstein said the policy set the airline apart during the pandemic, but as demand ramped up in March, the airline lost out on $100 million to $150 million of revenue because of its middle seat block.

The company expects to continue to generate cash in the second quarter, and expects about $2.7 billion in federal stimulus funding. It is using cash to pay down debt and fund pensions, and aims to reach a breakeven point in June, although it doesn’t expect to return to profitability until the July-September quarter.

Corporate demand and international revenue were still down about 80% in the first quarter compared with 2019 levels.

“The next big step is to see offices reopening, which I expect you’ll be seeing in the summer into the fall,” Bastian said.

Delta itself plans to reopen its offices in June, he said on CNBC.

Bastian expects to see meaningful increases in corporate travel after Labor Day, though there may be not be a significant recovery in international travel until 2022. Small- and medium-size businesses are returning to the skies faster than larger companies, according to Delta.

Delta’s largest U.S. rivals — American Airlines, United Airlines and Southwest Airlines — will report their first-quarter financial results next week.

Delta’s financial results

Revenue:

1Q/2021: $4.15 billion

1Q/2020: $8.59 billion

1Q/2019: $10.47 billion

Net profit/loss:

1Q/2021: $1.18 billion loss

1Q/2020: $534 million loss

1Q/2019: $730 million profit

Source: Delta Air Lines

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