Delta Air Lines (DAL) on Wednesday reported a big first-quarter loss and a bigger-than-expected revenue decline. The Delta earnings report is the first from a major carrier as the U.S. government tries stave off an airline-industry collapse due to the coronavirus pandemic. Delta stock rose modestly.
XDelta Earnings
Estimates: Wall Street expected Delta to swing to a loss of 72 cents per share from a year-ago profit of 96 cents a share, according to Zacks. Revenue was expected to fall 8% to $9.64 billion.
Results: Delta lost 51 cents a share, with revenue 18% to $8.59 billion. Total unit revenue plunged 12%. Fuel expenses fell 19%, but overall non-fuel unit costs rose 9%.
At the end of Q1, the company had $6.0 billion in unrestricted liquidity.
Outlook: Management sees Q2 expenses down by 50% due to lower capacity, which will see an 85% cut, as well as cheaper fuel and cost initiatives like parking 650 planes, a hiring freeze, and voluntary unpaid leave. Delta sees its cash burn rate slowing to $50 million a day by the end of Q2 from $100 million a day at the end of Q1.
Stock: Shares rose 2.5% in premarket trading on the stock market today. Among other airline stocks, Southwest stock climbed 2%. Southwest Airlines (LUV) rescheduled its first-quarter earnings date from Thursday to next Tuesday. American Airlines (AAL) dipped 0.1%. United Airlines (UAL), which priced 39.25 million shares overnight to raise capital, fell 3%.
As with other airline stocks, Delta stock cliff-dived after nations began clamping down on international travel, large events were cancelled, and people ordered to stay home and do work and business remotely. Passengers, despite airlines' efforts to decontaminate aircraft, have stayed off flights as infections surged.
Delta stock has a 35 Composite Rating, according to MarketSmith. Its EPS Rating is still 91.
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Delta Taking $5.4 Billion Rescue Aid
Airlines have wiped most flights from their schedules, and parked their jets. Airlines For America data last week found that big U.S. carriers had as few as 10 passengers, on average, on domestic flights. With demand at microscopic levels compared to last year, carriers are burning through cash. And they have raised or borrowed money, frozen hiring and asked employees to take voluntary furloughs.
Delta last week said it agreed to take $5.4 billion in coronavirus relief funds from the Treasury Department. That $5.4 billion includes a $1.6 billion 10-year, low-interest loan. That money is part of the $25 billion the government's $2 trillion stimulus bill set aside for passenger airlines to help them keep employees paid.
The bailout also gives the government warrants to hold roughly 1% of Delta stock at $24.39 per share over five years. As part of the terms of the rescue packages, the government can acquire airline stocks, debt securities and other financial instruments in exchange for the aid.
The government also carved out another $25 billion in loans for passenger carriers. On Monday, United Airlines said it had applied for up to $4.5 billion in government loans, and reported a preliminary first-quarter pretax loss $2.1 billion.
On Wednesday, Delta said it's eligible for $4.6 billion in secured loans from the government, if the company chooses to apply and accept funds.
In order to get any of it, airlines can't furlough employees voluntarily or cut pay through September. They also have to halt buybacks and dividends through next September and restrict executive compensation for another six months after that.
But analysts have worried that the airlines will still have to lay off employees once October rolls around. United last week warned as much. And they say that the rescue aid only gives them several months' worth of breathing room, and that it could take years for industry demand to recover.
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