Delta Air Lines
beat Wall Street’s revenue estimates in the first quarter and reported a loss of $1.85 a share, beating forecasts for a loss of $2.07.
More important, Delta (ticker: DAL) turned cash-positive in March and expects to break even on an operating basis in June, with profitability returning in the third quarter.
Delta’s stock doesn’t appear to be reacting positively, however. Shares were down 2.5% in recent trading, at around $47. The
was up 0.7%.
Delta’s first-quarter results were somewhat mixed. Revenue came in at $4.2 billion, beating forecasts for $3.9 billion. But the airline posted an adjusted loss of $3.55 a share, worse than estimates for a loss of $3.17.
Delta’s pretax loss came in at $2.9 billion, but it would have been higher if not for $1.2 billion in federal payroll grants.
Delta sounded upbeat about travel demand picking up and indicated it’s on a path back to profitability.
“Recent demand trends are encouraging with rising confidence in air travel as vaccination rates improve and travel restrictions ease, with current domestic leisure bookings 85% recovered to 2019 levels,” said Delta President Glen Hauenstein in an earnings release. He added that the airline expects to see “significant sequential” revenue gains in the June quarter as leisure travel accelerates, and noted that Delta will start selling middle seats on May 1, improving its available seating supply.
Delta also generated positive cash flows of $4 million a day in March, turning positive for the first time since the pandemic started.
Much of the rebound appears to be coming from domestic coach travel. Delta reported business and international passenger revenue down about 80% compared with the March 2019 quarter, though it expects to see a rebound in both in the third quarter.
Indeed, Delta is still taking in far less revenue per passenger than it did in 2019. While Delta’s capacity in the March quarter was down 36% from 2019, total passenger revenue was off 70%; that’s a sign that Delta is selling far more domestic coach tickets than higher-priced business and international fares, and it’s pressuring the airline’s revenue yields per flight.
Analysts’ initial reactions to the report were mixed.
Citigroup’s Stephen Trent noted that Delta’s release “had some meat” for both bulls and bears on the stock, adding that the industry doesn’t “seem to be entirely out of the woods.”
Nevertheless, he was encouraged by Delta’s comments about positive cash generation in the second quarter and its forecast for a return to profitability in the third quarter. He maintained a Buy rating on the shares and a $58 price target.
Cowen’s Helane Becker wasn’t all that impressed, though. The company’s guidance on second-quarter capacity, revenue, and nonfuel unit costs were all below her forecasts, she noted. She maintained a Market Perform rating on the shares and a $53 target.
Write to Daren Fonda at [email protected]