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Abu Dhabi, UAESunday 28 February 2021

Delta expects recovery from Q3 as demand rebounds

In Q1, the daily cash burn will amount to $10m to $15m

Delta Air Lines is hoping recovery will begin later this year after a punishing winter. EPA
Delta Air Lines is hoping recovery will begin later this year after a punishing winter. EPA

Delta Air Lines has a “good shot” at turning a profit in the third quarter as Covid-19 vaccinations start containing the disease and pent-up travel demand turns into bookings, chief executive Ed Bastian said.

The carrier stood firm on its target of breaking even on a cash-flow basis in the second quarter despite little sign of improvement in the next few months. In the first quarter, daily cash burn will amount to $10 million to $15m after totalling $12 million in the last three months of 2020, Delta said on Thursday as it reported earnings.

The outlook from the first major US airline to report results fuelled industry hopes that a recovery will begin later this year after a punishing winter. Except for short-lived gains during the holidays, US passenger totals in the fourth quarter languished at about a third of 2019 levels as the pandemic and government travel restrictions spurred an unprecedented drop in demand for flights.

“We expect 90 days from now, hopefully, the virus is going to be in a much more contained state,” Mr Bastian said. That will help “start to get consumer confidence going, not just in air travel but in public life, and businesses will start to reopen.”

Further growth in travel bookings are necessary for Delta to hit its break-even goal, and it’s too early to tell when vaccinations become readily available and what that means for summer travel, Cowen analyst Helane Becker said in a note.

“Our stance remains that cash break-even by the spring is aggressive, given what we know now,” she said. “2021 will be a tale of two halves, with 2022 likely when a new normal is formed.”

A choppy recovery in demand early this year will be followed by an inflection point in the spring as travel restrictions ease and customer confidence starts to grow, Delta president Glen Hauenstein said on a conference call to discuss results. Sustained improvement in demand and pricing will begin in the second half.

Published: January 15, 2021 04:16 PM

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