Delta Air Lines (DAL) reported a loss during the first quarter as the Omicron variant of COVID-19 proved to dampen travel plans in early 2022, but demand in the final month of the quarter drove its optimistic outlook for returning to profitability.
Here are the main results from the Q1 report compared to consensus estimates compiled by Bloomberg:
Adjusted net loss: $784 million vs $807 million expected
Adjusted loss per share: $1.23 vs $1.26 expected
Revenue: $8.16 billion vs $8.07 billion expected
Revenue during the quarter was restored to 79% of the levels seen prior to the COVID-19 pandemic, and business operations returned to profitability during the month of March during a surge in consumer demand.
"Over the last five weeks we’ve experienced the highest level of sales and booking activity at any time in our history," Delta CEO Ed Bastian told Yahoo Finance. "I think it’s going to be a very strong summer travel period for us going forward."
Delta is forecasting that during the second quarter 84% of capacity will return when compared to the same period during 2019 and expects revenue recovery to reach 93% to 97% of the pre-pandemic levels, which equates to $11.62 billion to $12.12 billion.
The company also anticipates unit revenue in the second quarter will be "double digits" above the same quarter in 2019. Bastian credited the forecast to the consumer, saying “demand is far in excess of what it was in 2019."
Higher fuel prices
Quarter over quarter, oil prices have risen dramatically.
Delta paid an average fuel price of $2.79 per gallon during the first quarter and is anticipating to pay $3.20 to $3.35 per gallon for the second quarter — based on Brent oil prices as of April 8.
The March CPI inflation reading revealed the extent to which businesses are currently factoring in elevated employee compensation and operational expenses into consumer prices. Travelers may see higher fares during the summer as wages fuel prices force airlines to pass the added costs on to customers.
"Unprecedented" demand is contributing to the airline having to cover fuel expenses on a more real-time basis, according to Bastian. Typically more time elapses before higher commodity prices drive airfare increases.
"We're seeing [ticket] prices are up, and the health of the demand environment is supporting it," Bastian told Yahoo Finance.
New premium customers
Historically airline profits were reliant on the rate of corporate travel, but with business travel still charting its return, Delta is counting on leisure travelers.
Corporate travel contributions to airline profits have allowed carriers to add new destinations, headcount and flight frequency to their schedules in the past. Now operators have been forced to cut routes to some destinations and reduce capacity.
"We are less dependent on the actual full amount of corporate travel that returns, because we know consumers are investing in a better quality experience," Bastian told Yahoo Finance, adding that Delta is experiencing all-time high demand on lower capacity. "When business [travel] does come back they’re going to compete with premium consumers for those seats."
Bradley Smith is an anchor at Yahoo Finance. Follow him on Twitter @thebradsmith.