Delta Air Lines expects a profit in the second quarter
The recovery in demand for air travel will allow Delta Air Lines Inc. (DAL) to make a big profit in the second quarter, management believes. The airline giant is on track to increase revenue to record levels within a few years. Three months ago, Delta Air Lines predicted that revenue in the first quarter would decrease by 24-28% compared to the first quarter of 2019.
But in reality, adjusted operating revenue reached $8.2 billion, which is 21% less than the first quarter of 2019. The indicators turned out to be better than those that the management originally planned. March 2022 was the first month in two years with a positive unit income compared to 2019.
Among the leaders are premium products, whose sales already correspond to the pre-pandemic level by almost 100%. There is also a high demand for cargo transportation. However, according to the company, business trips have not yet fully recovered. For the first quarter, Delta Air Lines reported an adjusted pre-tax loss of $1 billion and an adjusted loss per share of $1.23.
However, by March, the company was already consistently profitable, recording an adjusted operating margin of almost 10%. Thus, we can expect continued growth in the second quarter, although aviation fuel prices have reached the highest levels in the last ten years. Management predicts that revenue in the second quarter will decrease by only 3-7% compared to the second quarter of 2019, although capacity decreased by 16%.
Delta Air Lines also expects operating margins in the second quarter to be between 12% and 14%. This is below the operating margin in the second quarter of 2019. Entering double-digit territory would be an impressive achievement.
Delta Air Lines believes that the demand for air transportation will remain high enough to compensate for high fuel prices. The company believes that soon it will return to the capacity of the pre-pandemic level. This will reduce unit costs not related to fuel and increase the profitability of the airline.
