Delta lost $940 million in Q1, but bookings, revenue, bounce

Delta Air Lines lost $940 million in the first quarter, yet bookings have soared in recent weeks, setting off a breakout heat as Americans try to put the pandemic behind them.

Shares jumped 6% before the opening bell on Wednesday on strong revenue numbers and dragged other airlines along with it. Shares of Southwest, United and American all rose more than 4%.

Atlanta Airline still faces tough hurdles, including a sharp increase in fuel and labor costs. And it is not clear whether the rise in inflation will reduce travel expenses.

On Tuesday, the US reported that inflation The past year has grown at its fastest pace in more than four decades, led by rising fuel costs, which are the second-largest input cost for airlines after labour.

Delta’s jet fuel costs rose 33% from the previous quarter. Total adjusted operating expenses reached $9 billion in the first three months of the year, up 11% sequentially due to fuel prices and the pandemic spurring operations.

So far, however, neither inflation, nor the ongoing pandemic nor Russia’s war against Ukraine are having any effect on ticket sales. Delta officials say bookings began to increase in late February and continue to grow.

“The last five weeks have been the biggest bookings in our history,” CEO Ed Bastian said in an interview. “I think it is a sign that people are suffering from the virus. They feel like they have all the tools and technology to manage it.”

Bastian said he expects travel demand to remain strong for two to three months — in the future as far as airlines look after the venture.

“Then, as we move to the downside, it will be the next inflection point in terms of consumer health, what is the impact of inflation on them, higher fuel prices, what is the impact of the virus,” he said.

Delta forecast second-quarter revenue of about 95% of pre-pandemic levels, up from 89% in the first quarter. This trend will be driven by higher spending on premium seats and higher charges with Delta-branded credit cards.

At the same time, Delta is making up for much higher costs. It estimates that spending on everything other than labor and fuel will increase by about 17% on a per-seat basis in 2019 compared to the same quarter.

And jet fuel, which cost Delta an average of $2.79 per gallon in the first quarter, is expected to jump between $3.20 and $3.35. If Delta had paid the higher price in the first quarter, it would have spent an additional $364 million in fuel costs.

Bastian said demand for travel is strong enough for Delta to cover the high cost of fuel.

More than 2 million people a day now board planes in the United States on average, down from 90,000 a few days in April 2020. According to government data, airport congestion in April so far is only 9% less than in April 2019.

However, business travel, and especially international corporate travel, is yet to recover. Airlines are lobbying the Biden administration to drop a requirement that passengers test negative for COVID-19 before flying to the US, which they think is holding back those who may have contracted the virus. But afraid of being trapped away from home.

It is not clear whether administration officials will waive that rule. They are also considering eliminating or suspending the requirement to wear face masks on planes, airports and public transport.

Bastian favors abolishing the mask mandate. He said that some people may start flying if they do not wear masks, and if other passengers stop flying without wearing masks. He called both groups “fringe”.

If masks are no longer needed, “I think you’ll see a surprising number of people continue to wear masks, and of course some of our staff will wear masks,” he said. “I can choose to wear a mask sometimes.”

In the first quarter, Delta said its loss, excluding special items, worked out to $1.23 per share. Analysts polled by FactSet were expecting a loss of $1.27 per share, but they forecast profits over the next three quarters and the full year.

Revenue was $9.35 billion. Delta is getting almost the same amount of money per passenger in 2019, but there are more empty seats – the average flight was 75% full, compared to 83% in early 2019.

Like other airlines, Delta has added to debt during the pandemic by borrowing from the federal government and private sources. At the end of March, Delta was

At the end of March quarter 2022, the company had total debt and finance lease obligations of $25.6 billion. It aims to reduce debt by about $6 billion by the end of 2024.

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