Delta hopes to return to profitability by summer

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Delta Boston [Credit: QualityHD/Shutterstock.com]
Delta Air Lines reported net losses of $12.39 billion for 2020. Photo Credit: QualityHD/Shutterstock.com

Delta Air Lines expects to endure one more losing quarter before reaching break-even on daily cash burn sometime in the spring. The carrier is also bullish that it will return to profitability by the summer as vaccinations reach a critical mass and consumer confidence increases.

Delta customers, CEO Ed Bastian said Thursday, "feel they have had a year of their life taken from them and they expect to be ready to fly."

Related report: Delta loses more than $5B dollars in third quarter

His remarks came as the airline reported net losses for 2020 of $12.39 billion and net losses in the fourth quarter of $755 million amid the Covid-19 crisis. Delta's operating revenue in 2020 plunged 70% from 2019, to $12.88 billon. Revenue for the last three months of the year was $3.97 billion, a 65% year-over-year decrease.

Despite those dismal figures, the carrier entered 2021 well positioned to outlast the crisis. Delta reduced its daily cash burn during the fourth quarter to $12 million, half of its third quarter figure and down 90% from the opening days of the crisis in March.

Driving that improvement has been expense reductions. Delta's operating expenses were down 52% year over year, or $5.21 billion, in the December quarter, including a $1 billion decrease in salaries as the airline closed the year with 18,000 fewer employees than it began it with. 

Commissions for the fourth quarter, meanwhile, took a $404 million, or 83%, dive year over year, reflecting the brutal sales environment still faced by travel advisors. 

Delta ended 2021 with $16.7 billion in liquidity and with adjusted net debt of $18.8 billion, which is up $8.3 billion year over year.

For the quarter that ends in March, the carrier is anticipating cash burn to continue at a similar pace of $10 million to $15 million daily. It expects overall liquidity to rise to between $18 billion and $19 billion, burnished by its approximately $3 billion share of the second round of the federal payroll support grant program.

Delta is viewing 2021 as having three distinct business phases. The first, going through the first quarter, will continue to bring choppy demand with the booking curve compressed toward last-minute travel. The second quarter will be one of transition. Finally, the carrier expects the second half of the year to be boosted not only by the Covid-19 vaccine and new consumer confidence, but also by the reopening of many business offices throughout its global network. 

Bastian said that in Delta's most recent survey of customers, 70% expect to take a trip this year. Meanwhile, he remains more confident about the medium- and long-term prospect for business travel than some industry analysts. Forty percent of Delta's corporate customers expect their travel program to recover to 2019 levels in 2022, the survey revealed. 

Delta executives said that the carrier's revenue premium versus other airlines has never been better, in large part due to the airline's continued block on middle seat sales. 

"From all the research we've done and all the data we see, our brand has never been stronger," president Glenn Hauenstein said.

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