Today, October 13th, major US carrier Delta Air Lines reported the financial results of the quarter ended September 2020. Hit hard by the effects of COVID-19 travel restrictions, the airline’s cash burn averaged a whopping $24 million per day during this quarter – but was reduced by 25% below that average, to $18 million per day, during the month of September. Despite the huge losses, the airline continues to work its way back towards profitability and financial sustainability.
“While our September quarter results demonstrate the magnitude of the pandemic on our business, we have been encouraged as more customers travel and we are seeing a path of progressive improvement in our revenues, financial results and daily cash burn…The actions we are taking now to take care of our people, simplify our fleet, improve the customer experience, and strengthen our brand will allow Delta to accelerate into a post-COVID recovery.” -Ed Bastian, Chief executive officer, Delta Air Lines
Nearly $6.9 billion in pre-tax losses
According to the airline’s financial reporting, its September quarter 2020 performance resulted in a pre-tax loss of $6.9 billion, which breaks down to a loss per share of $8.47. Delta’s total revenue during this quarter amounted to $3.1 billion.
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The results are, unsurprisingly, a significant drop from the same time last year – down 79% to be precise, as demand for air travel remains under substantial pressure. Delta goes on to say that passenger revenues declined 83% on 63% lower capacity.
Non-ticket revenue streams performed relatively better than passenger revenues, as total loyalty revenues declined 60% and cargo down by 25%.
While it may be two years or more until we see a normalized revenue environment, by restoring customer confidence in travel and building customer loyalty now, we are creating the foundation for sustainable future revenue growth. -Glen Hauenstein, President, Delta Air Lines
The foundation for recovery
Delta listed three critical aspects as foundational to its COVID-19-recovery strategy. They are as follows:
- Taking great care of Delta people. This includes voluntary separation and early retirement programs, as well as various other initiatives to avoid involuntary furloughs for the airline’s ground and flight attendant employees.
- Improving the customer experience. In addition to enhanced health precautions and cleaning, the airline is reducing complexity for customers as it has eliminated change fees for nearly all of its domestic fares. It has also eliminated redeposit/re-issuance fees for domestic reward tickets for SkyMiles members. To date, Delta says that approximately $2.8 billion has been returned to customers since the start of this year.
- Simplifying the fleet. Delta has restructured its Airbus and CRJ aircraft order books to “better match the timing of aircraft deliveries with network and financial needs over the next several years.” In addition to this order restructuring, the airline has accelerated the retirements of nearly 400 aircraft by 2025, including more than 200 in 2020.
A balance between employees, passengers, and shareholders
It looks like Delta is trying to find a healthy balance between taking care of its employees and customers while at the same time reducing its cash burn through aircraft retirements and voluntary retirement packages and more.
It will be interesting to see if the airline can continue the trend and further reduce its cash burn through October and the rest of the 4th quarter.
How do you think Delta has handled the crisis and its financial difficulties so far? Let us know in the comments.