Delta pushes back target for plugging its cash bleed
Chicago — Delta Air Lines says it does not expect to plug a daily cash bleed due to the Covid-19 pandemic until May next year, though it has at its disposal $1.3bn in leftover federal aid for employees’ payroll.
The airline previously said it could halt a cash bleed that averaged $18m a day in September before the end of the year, but pushed back the target as revenues fell 76% to $3.1bn in the third quarter from a year earlier.
Atlanta-based Delta, the first US airline to report third-quarter results, said it expects its cash burn to narrow to $10m to $12m a day in December. It was burning $27m in cash per day in June.
The company swung to a $5.4bn net loss, or $8.47 a share, in the quarter ended September 30, from a $1.5bn profit a year ago. Analysts had estimated a $3.04 per share loss, based on Refinitiv data.
The losses included a $3.1bn charge for voluntary separation and early retirement programmes as Delta slimmed its workforce as demand plunged, and a $2.2bn fleet restructuring charge.
However, a 32% decline in labour costs in the quarter led to $1.3bn in unspent federal funds awarded by Congress in March to cover airline’s payroll costs for six months and protect jobs.
“We’ve stretched those dollars out,” Delta’s CEO, Ed Bastian, said. The company can use the money in the fourth quarter, on top of any additional aid if legislators approve another $25bn payroll support programme for US airlines, he said.
An industry push for more aid has broad bipartisan backing but is stalled amid a Washington deadlock over wider Covid-19 economic relief.
Unlike its two major rivals, Delta has avoided the furlough of flight attendants and other front-line employees after reducing work hours, but it could still furlough 1,700 pilots on November 1 without a union agreement or more federal aid, Bastian said.
Delta’s flight capacity was down 63% in the third quarter and its average load factor was just 41% vs 88% a year ago, though the average yield per passenger declined only 2%.
To woo pandemic-wary passengers, the airline is blocking off middle seats until the end of the year. The policy beyond that will depend on Covid-19 testing developments, traveller surveys and continued studies on the risk of Covid-19 transmission on aircraft. Studies so far have shown the risk is “remarkably low,” Bastian said.
Delta has spent hundreds of millions of dollars on efforts to restore passenger confidence, and while more people are beginning to travel, quarantines and uneven public health measures remain a deterrent, Bastian said.
He estimates business travel will recover in 12 to 24 months, though not at 100%. Delta is operating about 15% of its normal business travel, he said.
With no immediate need for new jets, the company has reduced purchase commitments for Airbus and Bombardier CRJ aircraft by more than $2bn in 2020 and by more than $5bn through to 2022.
Delta ended the quarter with $21.6bn in liquidity, after a $9bn capital-raising in September secured by its loyalty programme. Adjusted net debt totalled $17bn.
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