AP – Delta Air Lines lost $940 million in the first quarter, but bookings have surged in recent weeks, sparking a breakout summer as Americans try to put the pandemic behind them.
Shares jumped more than 6% before yesterday’s opening bell on strong earnings numbers.
The Atlanta-based airline continues to face headwinds, including steep increases in fuel and labor costs. And it’s unclear whether soaring inflation will dampen travel spending.
On Tuesday, the United States (US) reported that inflation over the past year rose at its fastest pace in more than four decades.
So far, however, neither inflation, nor the ongoing pandemic, nor Russia’s war against Ukraine seem to be impacting ticket sales. Delta officials said bookings started to increase in late February and have continued.
“The past 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 done with the virus. They feel they have the tools and the technology to handle it.
Bastian said he expects travel demand to remain strong for two to three months – about as far into the future as airlines want to venture.
“Then when we get into the fall, that will be the next inflection point in terms of consumer health, what impact inflation has had on them, rising fuel prices, what impact has the virus had -he,” he said.
Delta expects revenue to be around 95% of pre-pandemic levels in the second quarter, down from 89% in the first quarter. The trend will be driven by increased spending on premium seats and increased billing with Delta-branded credit cards.
At the same time, Delta is preparing for much higher costs. He predicts spending on labor and everything other than fuel will increase by about 17% per seat, compared to the same quarter in 2019.
And jet fuel, which cost Delta an average of $2.79 a gallon in the first quarter, is expected to climb 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 to refuel.
Bastian said travel demand was strong enough to allow Delta to cover higher fuel costs.
From less than 90,000 on some days in April 2020, now more than two million people a day are boarding planes in the United States on average. So far in April, airport traffic is down just 9% from April 2019, according to government figures.
In the first quarter, Delta said its loss, excluding special items, was $1.23 per share. Analysts polled by FactSet had expected a loss of $1.27 per share, but they expect profits in each of the next three quarters and the full year.
Revenue was $9.35 billion. Delta receives almost the same amount of cash per passenger as in 2019, but there are more empty seats – the average flight was 75% full, compared to 83% at the start of 2019.
Like other airlines, Delta has taken on debt during the pandemic by borrowing from the federal government and private sources.
At the end of the March 2022 quarter, the company had total debt and lease obligations of $25.6 billion. It aims to reduce the debt by about $6 billion by the end