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Delta's (DAL) Q1 Loss Wider Than Expected, Revenues Beat

Delta Air LinesDAL first-quarter 2021 loss (excluding $1.70 from non-recurring items) of $3.55 per share was wider than the Zacks Consensus Estimate of $3.08 as well as the first-quarter 2020 loss of 51 cents. This was the fifth successive quarterly loss incurred by this Atlanta-GA based company.

Despite the recent uptick in air-travel demand as more and more Americans get vaccinated, the picture remains bleak when compared to the first-quarter of 2019. Consequently, passenger revenues plunged 70% from the levels recorded in the comparable quarter of 2019 to $2,748 million.

Cargo revenues increased 12% to $215 million while revenues from other sources climbed 16% to $1,187 million. Due to the passenger revenue weakness, total revenues in the March quarter tanked 51.7% and 60% to $4,150 million from the first-quarter 2020 and 2019 levels, respectively. Revenues, however, topped the Zacks Consensus Estimate of $3,821.3 million.

Apart from the revenue beat, another bright spot on the earnings report in this coronavirus-ravaged scenario was that average daily cash burn (which was $11 million) in the March quarter turned positive last month. Notably, cash generation was $4 million per day in March. Per Delta’s CEO Ed Bastian, “If recovery trends hold, we expect positive cash generation for the June quarter and see a path to return to profitability in the September quarter as the demand recovery progresses."

Delta Air Lines, Inc. Price, Consensus and EPS Surprise

Delta Air Lines, Inc. price-consensus-eps-surprise-chart | Delta Air Lines, Inc. Quote

Other Financial Details of Q1

Below we present all comparisons (in % terms) to first-quarter 2019 (pre-coronavirus levels).

Revenue passenger miles (a measure of air traffic) tumbled 65% to 17,948 million. With Delta making significant capacity cuts to match the coronavirus-induced sharp decrease in traffic, capacity (measured in available seat miles) contracted 36% to 40,118 million. With the fall in traffic outpacing the capacity reduction, load factor (percentage of seats filled by passengers) was down to 45% from 83% in the comparable 2019 quarter.

Passenger revenue per available seat mile (PRASM) too took a 54% dive to merely 6.85 cents. Passenger mile yield decreased to 15.31 cents from 17.93 cents in the first quarter of 2019. On an adjusted basis, total revenue per available seat mile (TRASM) in the March quarter deteriorated 46% to 9 cents.

Total operating expenses including special items declined 41% to $5,548 million. Notably, expenses on aircraft fuel and related taxes plunged 49% in the reported quarter. With most of the fleet remaining grounded/under-utilized, fuel gallons consumed decreased 43% to $545 million. Average fuel price per gallon (adjusted) dropped 6% to $1.91. Non-fuel unit cost (adjusted) increased 4% in the reported quarter.

The airline had liquidity worth $16.6 billion at the end of the March quarter (including cash and cash equivalents, short-term investments and undrawn revolving credit facilities). The company, currently carrying a Zacks Rank #3 (Hold), had total debt and finance lease obligations of $29 billion with adjusted net debt of $19.1 billion. Inclusive of the benefit from the second round of the Payroll Support Program (PSP2), cash generated from operations during the reported quarter was $691 million.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Q2 Outlook

Notably, all % comparisons are to second-quarter 2019. For the second quarter of 2021, the carrier expects scheduled capacity to decline roughly 32%. Total revenues are likely to slump in the 50-55% band. Fuel price per gallon is anticipated in the $1.85-$1.95 range.

The non-fuel unit cost (adjusted) is expected to increase between 6% and 9%. Capital expenses are anticipated to be roughly $550 million. Adjusted net debt (including estimated PSP3 funds of $2.7 billion, which are likely to be received in the second quarter) is expected in the $19-$19.5 billion band.

Impending Airline Releases

Investors interested in the Zacks Airline industry would look forward to the first-quarter 2021 earnings reports of United Airlines UAL, Alaska Air Group ALK and Southwest Airlines LUV. While United Airlines will report results on Apr 19, Alaska Air and Southwest Airlines will release the same on Apr 22.

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