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Delta's (DAL) Q2 Loss Narrower Than Expected, Revenues Beat

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Delta Air Lines’ DAL second-quarter 2021 loss (excluding $2.09 from non-recurring items) of $1.07 per share was narrower than the Zacks Consensus Estimate of a loss of $1.41 as well as the second-quarter 2020 loss of $4.43. This was the sixth successive quarterly loss incurred by the Atlanta-GA based company.

Despite the recent uptick in air-travel demand (particularly for leisure) in the United States as more and more Americans get vaccinated, the picture remains bleak when compared to the second-quarter 2019. Consequently, passenger revenues plunged 53% from the levels recorded in the comparable quarter of 2019 to $5,339 million. Meanwhile, the improvement in air-travel demand in the United States can be gauged from the fact that 83.9% of the second-quarter 2021 passenger revenues came from domestic markets.

Cargo revenues increased 35% to $251 million while revenues from other sources climbed 56% to $1,536 million. Due to the passenger revenue weakness, total revenues in the June quarter tanked 43% to $7,126 million from the second-quarter 2019 level. Revenues were, however, substantially higher than the year-ago levels, buoyed by the recent uptick in air-travel demand. The metric also topped the Zacks Consensus Estimate of $6,340.9 million.

Reflecting the improving booking trends, the average daily net cash sales (tickets purchased less tickets refunded) at Delta were 70% restored in June compared with the 2019 levels. In the month of June, Delta achieved pre-tax profit.

Delta Air Lines, Inc. Price, Consensus and EPS Surprise

Delta Air Lines, Inc. Price, Consensus and EPS Surprise
Delta Air Lines, Inc. Price, Consensus and EPS Surprise

Delta Air Lines, Inc. price-consensus-eps-surprise-chart | Delta Air Lines, Inc. Quote

Other Financial Details of Q2

Below we present all comparisons (in % terms) to second-quarter 2019 (pre-coronavirus levels).

Revenue passenger miles (a measure of air traffic) tumbled 47% to 33,285 million. With Delta making significant capacity cuts to match the coronavirus-induced sharp decrease in traffic, capacity (measured in available seat miles) contracted 32% to 48,529 million. With the fall in traffic outpacing the capacity reduction, load factor (percentage of seats filled by passengers) was down to 69% from 88% in the comparable quarter of 2019.

Passenger revenue per available seat mile (PRASM) too took a 31% dive to merely 11 cents. Passenger mile yield decreased to 16.04 cents from 18 cents in the second quarter of 2019. On an adjusted basis, total revenue per available seat mile (TRASM) in the June quarter deteriorated 25% to 13.08 cents.

Total operating expenses including special items declined 39% to $6,310 million. Expenses on aircraft fuel and related taxes slumped 35% in the reported quarter. With most of the fleet remaining grounded/under-utilized, fuel gallons consumed decreased 37% to $690 million. Average fuel price per gallon (adjusted) climbed 2% to $2.12. Non-fuel unit cost increased 9% in the reported quarter.

The airline had liquidity worth $17.8 billion at the end of the June quarter (including cash and cash equivalents, short-term investments and undrawn revolving credit facilities). The company, currently carrying a Zacks Rank #3 (Hold), had total debt and finance lease obligations of $29.1 billion with adjusted net debt of $18.3 billion. Inclusive of the benefit from the Payroll Support Programs, cash generated from operations during the reported quarter was $1.9 billion. The company generated free cash flow (adjusted) to the tune of $195 million in the June quarter.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Q3 Outlook

Notably, all comparisons in percentage are made to third-quarter 2019. For the third quarter of 2021, the carrier expects capacity to decline in the 28-30% band from the number reported in third-quarter 2019. The carrier anticipates total revenues to drop in the 30-35% range from third-quarter 2019 actuals. Non-fuel unit costs in third-quarter 2021 are expected to increase in the 11-15% band from the third-quarter 2019 actuals.

Fuel price per gallon in the September quarter is projected in the $2.05-$2.15 range. Capital expenditures and adjusted net debt are likely to be around $800 million and $19 billion, respectively, in the September quarter.

Impending Airline Releases

Investors interested in the Zacks Airline industry will look forward to the second-quarter 2021 earnings reports of United Airlines UAL, Alaska Air Group ALK and Southwest Airlines LUV. While United Airlines will report results on Jul 20, Alaska Air and Southwest Airlines will release the same on Jul 22.


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