Delta Air Lines Inc (DAL.N) reported on Wednesday its first quarterly loss in eight years as the coronavirus crisis devastates air travel demand, and warned that a recovery could take two to three years. “We should be prepared for a choppy, sluggish recovery even after the virus is contained,” Chief Executive Ed Bastian said in an employee memo on Wednesday.
In a matter of months, U.S. airlines like Delta have gone from expansion to survival, searching for ways to raise and save as much cash as possible as flight cancellations started outnumbering new bookings around mid-March.
By the end of the quarter, passenger volumes had dropped by as much as 95 percent.
“This certainly isn’t the world we were expecting when the year began,” Bastian said.
Atlanta-based Delta swung to a $534 million net loss in the first quarter that ended March 31, or a $0.84 loss per share, from a $730 million net profit a year earlier.
It forecast a 90% decline in second-quarter revenue.
Total operating revenues fell 18% to $8.59 billion in the March quarter, with the airline burning $100 million per day at the end of March as it continued to operate previously scheduled flights that were nearly empty.
Between April and June, Delta is reducing its flight schedule by about 85%, including an 80% cut for domestic flights and 90% for international flights, which experts expect will be the slowest to recover.
The capacity cuts – in addition to other measures including executive pay reductions and unpaid leaves – should slow the airline’s daily cash burn to about $50 million by the end of June, it said, with total expenses also declining by about 50%, or $5 billion, in the second quarter.
Delta, the first U.S. airline to post first-quarter results, is among those receiving a government bailout meant to cover six months of payroll on the condition that it not lay off employees until October and retain a certain number of flights.
It received half of its $5.4 billion payroll aid on Monday; the remainder will arrive over April, May and June.
Between that money, cost-saving steps and capital raisings, Delta expects to end June with $10 billion in liquidity, up from $6 billion in March.
The airline also said it was considering applying for an additional $4.6 billion in secured government loans under the stimulus package known as the CARES Act.
Airlines could benefit in the coming quarter from a recent plunge in oil prices, though with so few planes flying the impact may not be substantial.
Delta’s fuel expenses decreased 19% in the first quarter compared with a year earlier. It paid $1.81 per gallon, including a $29 million benefit from its refinery.
Delta has parked more than 650 aircraft in the midst of the crisis. Some of those jets may never fly again as airlines look to downsize and retire older planes.