Delta Air Lines Posts 2020 Financial Results, Highlights Outlook for 2021

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Delta Air Lines has announced financial results for 2020 and provided its outlook for the March quarter 2021.

“Our December quarter results capped the toughest year in Delta’s history. I want to thank the Delta people who have risen to the occasion, focusing on delivering results for all of our stakeholders by putting our customers at the center of our recovery,” said Ed Bastian, Delta’s chief executive officer.  “While our challenges continue in 2021, I am optimistic this will be a year of recovery and a turning point that results in an even stronger Delta returning to revenue growth, profitability and free cash generation.”

December Quarter Financial Results
Adjusted pre-tax loss of $2.1 billion excludes nearly $1 billion of items directly related to the impact of, and our response to, COVID-19, including charges associated with employee pay and benefit changes, which were offset by the benefit of the CARES Act payroll support program (PSP) grant recognized in the quarter
Adjusted operating revenue of $3.5 billion declined 69 percent on 62 percent lower sellable capacity (see Note A) versus the prior year period.
Total operating expense, which includes $930 million of items described above, decreased $5.2 billion over prior year period. Adjusted for those items and third-party refinery sales, total operating expense decreased $4.6 billion or 47 percent in the December quarter compared to the prior year period, driven by lower capacity- and revenue-related expenses and strong cost management across the business
During the December quarter cash burn (see Note B) averaged $12 million per day, marking an approximate 90 percent reduction in cash burn since late March
At the end of 2020, the company had $16.7 billion in liquidity, including cash and cash equivalents, short-term investments and undrawn revolving credit facilities

Full Year 2020 Financial Results
Adjusted pre-tax loss of $9.0 billion excludes a net of $6.6 billion of items primarily related to the impact of, and our response to, COVID-19
Adjusted operating revenue of $15.9 billion declined 66 percent on 61 percent lower sellable capacity versus the prior year
Total operating expense, which includes $4.3 billion of COVID- related and other items, decreased $10.8 billion over prior year. Adjusted for those items and third-party refinery sales, total operating expense decreased $16.0 billion or 40 percent in 2020 compared to the prior year

March Quarter 2021 Outlook

1Q21 Forecast

Scheduled Capacity
Down ~35percent

Sellable Capacity 1
Down ~55percent

Total Revenue
Down 60percent – 65percent

Total Operating Expense 1, Down 35percent – 40percent

Consolidated CASM Down 5percent – 10percent

Capital Expenditures
~$350 million

Average Daily Cash Burn 2
$10-15 million

Liquidity
$18-19 billion

Adjusted Net Debt
~$18 billion

<strong>Compared to March quarter 2019                                                                                        Non-GAAP measure</strong>                                                                                         Includes estimated PSP funds of ~$3.0 billion

Revenue Environment

Delta’s adjusted operating revenue of $3.5 billion for the December quarter was down 69 percent versus the prior year period, a 10-point improvement from September quarter 2020. Passenger revenues declined 74 percent on 62 percent lower sellable capacity. Non-ticket revenues outperformed passenger revenues, with cargo revenues up 10 percent versus the prior year period and total loyalty revenues down 54 percent.

For the full year, adjusted operating revenue declined to $15.9 billion, down 66 percent versus 2019, as the global pandemic severely affected air travel. Passenger revenues declined 70 percent on 61 percent lower sellable capacity. Total loyalty revenues were down 51 percent and American Express remuneration declined 30 percent compared to prior year to $2.9 billion.

“We see three distinct phases in 2021. The early part of the year will be characterized by choppy demand recovery and a booking curve that remains compressed, followed by an inflection point, and finally a sustained demand recovery as customer confidence gains momentum, vaccinations become widespread and offices re-open,” said Glen Hauenstein, Delta’s president.  “For each phase, Delta has the levers to pull to successfully react to the emerging demand environment, including tightly matching our sellable capacity to expected demand.”

Cost Performance

Total adjusted operating expense for the December quarter decreased $4.6 billion or 47 percent versus the prior year period excluding items related to the company’s response to COVID-19 and the $1.4 billion CARES Act benefit, resulting in Delta’s consolidated CASM, adjusted being 4.5 percent lower than the prior year period. This performance was driven by a $1.3 billion, or 64 percent reduction in fuel expense versus the prior year period, a 51 percent reduction in maintenance expense and lower volume- and revenue-related expenses. Salaries and related costs were down 34 percent compared to the prior year period as a result of approximately 20 percent of our workforce, or nearly 18,000 employees, electing to voluntarily depart the company, in addition to the impact of voluntary unpaid leaves, work hour reductions and other cost-saving initiatives.

Non-operating expense for the December quarter was up $248 million versus the prior year period, driven primarily by higher interest expense from increased debt the company has incurred during the COVID-19 pandemic.

“We reduced our average daily cash burn to $12 million in the December quarter, a reduction of nearly 90 percent since the early days of the pandemic in March, as we progress to achieving cash breakeven in the spring,” said Gary Chase, Delta’s interim co-chief financial officer. “Remaining agile and disciplined with our cost structure will be key to our success, and when combined with an improving demand environment, will allow us to return to the free cash flow generation needed for debt reduction.”

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