Delta Air Lines lost $534 million in the first three months of the year, its first quarterly loss in more than five years. It became the first airline to report the financial blow caused by the outbreak of the coronavirus.
The airline said its loss, excluding special items, came in at $326 million, compared to a $639 million profit a year earlier. Revenue in the quarter fell $1.9 billion compared to a year ago, an 18% drop. The miles flown by paying passengers fell by 17%, and the amount that they paid to fly each of those miles fell by 13% as fares plunged at the end of the quarter.
"The first quarter of 2020 has truly been like no other in our history," CEO Ed Bastian said in comments to investors.
But the quarter was only the beginning of the problems for the carrier: Delta confirmed its previous warning that it expects revenue to be down 90% in the current quarter, and the airline sees years of reduced demand for travel.
"While we all wish we could predict the pace of the recovery, the truth is a recovery will be dictated by our customers feeling safe, both physically and financially, to begin travel again," said Bastian. Given the combined effects of the pandemic and associated financial impact on the global economy, we believe that it could be up to three years before we see a sustainable recovery."
The number of people being screened at US airports by TSA is down 95% so far in April. Delta and other airlines are slashing their schedules for the quarter and grounding most of their planes.
The loss at Delta was smaller than the loss forecast by Wall Street analysts surveyed by Refinitiv. Every US airline is forecast to report losses of its own for the first three quarters of this year, at least.
First-quarter operating losses for the US industry are forecast to reach at least $2 billion. United Airlines has warned it will report a $1 billion pre-tax operating loss itself in the first quarter, as it said demand for air travel has fallen to "essentially zero."
Congress recently approved a $50 billion relief package for the industry, with $17.5 billion in federal grants and the rest in loans.
What the future brings to airlines
This financial disaster is a stunning turnaround for the US industry, and for Delta. A strong economy and full planes through the end of last year had resulted in high fares and a strong bottom line. This year started with Delta paying a record $1.6 billion in profit sharing to its employees for 2019, equal to about two months of their normal salary. It won't be paying any profit sharing for this year.
Delta said it was burning through $100 million a day in cash by the end of March. But it said that expects to trim that cash burn by half by the end of the June quarter. It said its second-quarter schedule will be down 85% from a year ago, and it parked 650 aircraft. Delta slashed $3 billion from capital spending plans, including deferring some aircraft deliveries.
The federal assistance comes with the requirement that airlines do not implement any involuntary layoffs, furloughs or pay cut for employees through the end of September, and the companies must maintain some service to all cities it previously served. But Delta said 37,000 of its 90,000 employees have agreed to take unpaid leaves during the crisis.
The other savings come from a sharp drop in the cost of fuel, typically the second largest expense for an airline. Delta's fuel consumption was down 8.5% in the first quarter, and the average price paid for fuel fell 11%. Combined that resulted in $383 million savings in the quarter. Both consumption and prices will be lower in the second quarter, as more flights are grounded and the price of oil has collapsed to unprecedented levels.
Delta owns its own oil refinery, which presents some risk to the company as oil prices sink.
Shares of Delta were initially up in early trading on the report, but they fell into negative territory once the investor call began.