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Delta loses USD940M in Q1, but bookings, revenue surge

AP – Delta Air Lines lost USD940 million in the first quarter yet bookings surged in recent weeks, setting up a breakout summer as Americans try to put the pandemic behind them.

Shares jumped over six per cent before the opening bell yesterday on strong revenue numbers.

The Atlanta airline still faces stiff headwinds, including a sharp rise in fuel and labour costs. And it is not clear whether spiking inflation will throttle travel spending.

On Tuesday, the United States (US) reported that inflation in the past year rose at its fastest pace in over four decades.

So far, though, neither inflation, the ongoing pandemic nor Russia’s war against Ukraine seem to be having any impact on ticket sales. Delta officials said bookings started to rise in late February and have kept going.

“The last five weeks have been the highest bookings in our history,” CEO Ed Bastian said in an interview. “I think that’s an indication that people are through with the virus. They feel they have the tools and the technology to manage it.”

Bastian said he expects travel demand to remain strong for two to three months – about as far into the future as airlines care to venture.

“Then, when we get to the fall, that will be the next inflection point as to consumer health, what impact inflation has had on them, higher fuel prices, what impact there is from the virus,” he said.

A Delta Air Lines plane taxis down a runway at John F Kennedy International Airport in New York. PHOTO: AP

Delta forecast second-quarter revenue of about 95 per cent of pre-pandemic levels, up from 89 per cent in the first quarter. The trend will be driven by more spending on premium seats and more charging with Delta-branded credit cards.

At the same time, Delta is bracing for much higher costs. It forecast that spending on labour and everything else other than fuel will rise about 17 per cent on a per-seat basis, compared with the same quarter in 2019.

And jet fuel, which cost Delta an average of USD2.79 a gallon in the first quarter, is expected to jump to between USD3.20 and USD3.35. If Delta had paid the higher price in the first quarter, it would have spent an extra USD364 million fuelling up.

Bastian said travel demand is strong enough to let Delta cover higher fuel costs.

From under 90,000 on some days in April 2020, now over two million people a day on average board planes in the US. So far in April, airport crowds are down only nine per cent from April 2019, according to government figures.

In the first quarter, Delta said its loss, excluding special items, worked out to USD1.23 per share. Analysts polled by FactSet expected a loss of USD1.27 per share, but they predict profits in each of the next three quarters and the full year.

Revenue was USD9.35 billion. Delta is getting nearly the same amount of money per passenger that it got in 2019, but there are more empty seats – the average flight was 75 per cent full, compared with 83 per cent in early 2019.

Like other airlines, Delta has added debt during the pandemic by borrowing from the federal government and private sources.

At the end of the March quarter 2022, the company had total debt and finance lease obligations of USD25.6 billion. It aims to trim about USD6 billion in debt by the end
of 2024.