- Delta said it plans to halve its cash burn rate
to $50 million a day by the end of the second quarter.
- The airline posted its first quarterly loss in
five years as travel demand dried up.
- Financial results of Delta and other carriers
are expected to worsen in the second quarter.
Delta Air Lines’ on Wednesday
posted its first quarterly loss in more than five years and issued a bleak
spring forecast as the coronavirus continues to sap travel demand.
Airlines are among the industries
hit hardest by coronavirus and harsh measures to stop it from spreading, like
stay-at-home orders. Carriers including Delta were granted a portion of $25
billion in government grants and loans dedicated to paying employees through
The Atlanta-based carrier’s
revenues plunged 18% in the first three months of the year to $8.6 billion. CEO
Ed Bastian said second-quarter revenue will likely fall 90% from the same period
of 2019 and forecast a long recovery, telling employees that the airline will
be smaller in the future.
“We don’t know when it will
happen, but we do know that Delta will be a smaller airline for some time, and
we should be prepared for a choppy, sluggish recovery even after the virus is
contained,” he wrote in a staff note. “I estimate the recovery period could
take two to three years. I hope it’s sooner, but we need to be realistic in our
The airline spent the quarter
shoring up cash and slashing expenses to combat the sharp drop in revenue.
Delta’s is carrying about 5% of its normal passenger loads, Bastian told CNBC.
The carrier burned through $100
million a day at the end of March, a rate it expects to halve by the end of the
Delta posted a net loss of $534
million for the first three months of the year. On an adjusted basis, Delta
reported a per-share loss of 51 cents, compared with analysts’ estimates for a
70 cent per-share loss in the first quarter. Delta were down more than 2.8% in
Delta raised $5.4 billion since
the end of March, including a $3 billion term loan and $1.2 billion from
aircraft sale leasebacks. It also drew down $3 billion of an existing credit
facility and cut planned capital expenditures by the same amount.
“The decade of work we put into
the balance sheet to lower debt and build unencumbered assets has been critical
to our success in raising capital and we expect to end the June quarter with
approximately $10 billion in liquidity,” Delta’s CFO Paul Jacobson said in a
Delta said it expects to get
about $5.4 billion in the government payroll aid — $3.8 billion in grants and a
$1.6-billion unsecured 10-year loan. It received the first installment on Monday.
The $2.2 trillion in coronavirus relief Congress passed last month sets aside a
separate $25 billion in loans for airlines. Delta said it considering applying
and that it is likely eligible for about $4.6 billion.
Delta late Wednesday said it will
offer $1.5 billion of secured notes due in 2025 and that it’s lined up a
separate $1.5 billion term loan.
The new debt will be backed by
airport slots, gates and routes, including at New York’s LaGuardia Airport,
John F. Kennedy International Airport, Reagan National Airport and London’s
Heathrow Airport among others.
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