Delta Air Lines reports quarterly loss of $940 million, but says March was profitable

Delta Air Lines said Wednesday it posted a $940 million loss in the first three months of the year as booming ticket sales were offset by high fuel prices.

But the airline, which had expected a loss for the quarter, said its March operations were profitable and it had been able to pass on some of the higher fuel cost to customers.

The company reported adjusted operating revenue of $8.2 billion, down 21% from the same quarter in 2019 and beating the guidance it released at the start of the year. Delta said it expected second-quarter revenue to decline only 3-7% from a similar period in 2019.

“With a strong rebound in demand as Omicron faded, we returned to profitability in the month of March,” Delta CEO Ed Bastian said in a statement, adding that the company was “successfully resuming rising fuel prices”.

Shares of the company rose more than 5% in Wednesday morning trading.

Delta said strong spring break travel, office reopenings and the lifting of travel restrictions helped improve demand in the first few months of the year.

Domestic business travel recovered to around 70% in March, compared to the same month in 2019. International business travel recovered to around 50%. Delta also said revenue from premium seat sales on domestic flights fully recovered to 2019 levels last month.

Rising jet fuel prices, however, dampened this momentum. Delta said it pays an average price of $2.79 per gallon for fuel, up 33% from the last quarter of last year. This price included a saving of 7 cents per gallon from the airline’s oil refinery outside of Philadelphia. The refinery also received nearly $1.2 billion in revenue from third-party sales.

On Wednesday, the airline said it expects fuel prices to rise even further, to between $3.20 and $3.35 a gallon. It expects second-quarter seat capacity to be restored to around 84%.

The industry started the year with widespread flight disruptions as winter storms and staff shortages caused by the fast-spreading Omicron variant of the coronavirus hampered its ability to handle the busy holiday season. At Delta, for example, about 8,000 employees — more than one in 10 — have been sick, the airline revealed in January. At the time, Mr Bastian estimated that the variant had delayed the airline’s takeover by around 60 days.

Delta said in January that it expected losses that month and into February, with a return to profitability in March. While Delta expected a loss in the first three months of this year, it forecast profits throughout the rest of the year.

March started off strong, with several airlines announcing better-than-expected sales. But some of that improvement has been hampered by high fuel prices caused by Russia’s invasion of Ukraine and supply chain issues. Still, at an investor conference last month, American Airlines said it expected the additional revenue to more than offset higher fuel prices.

At the same conference, Glen Hauenstein, Delta’s chairman, said the airline could “easily” increase fares in the second quarter to offset rising fuel costs, recouping costs faster than normal as customers book flights closer to the date of travel. . On an average price of around $200 one-way, the airline will have to recover $15 to $20, he said at the time. A United Airlines executive was also optimistic the airline would be able to pass fuel costs on to customers at higher fares.

The industry has recently taken a turn, according to an analysis by the Adobe Digital Economy Index. In February, for the first time since the start of the pandemic, domestic ticket sales exceeded those for the same month in 2019, according to the analysis. The trend continued last month, with prices up 20% from March 2019, Adobe reported on Tuesday.

In recent weeks, about two million people have been screened daily at Transportation Security Administration security checkpoints, about 90% of those screened during a similar period in 2019.

Delta was the first major US airline to report its first quarter performance. American and United plan to report results next week, with Southwest Airlines expected to follow the following week.

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