Delta Air Warns of Loss in Current Quarter on Omicron Turbulence

Spread the love


CHICAGO—Delta Air Lines Inc. on Thursday reported higher quarterly earnings on the back of strong holiday travel demand, but warned of a loss in the quarter through March due to turbulence caused by the Omicron coronavirus variant.

“Despite expectations for a loss in the March quarter, we remain positioned to generate a healthy profit in the June, September, and December quarters, resulting in a meaningful profit in 2022,” Dan Janki, Delta’s chief financial officer, said in a statement.

Delta said the Omicron variant will likely delay the recovery in travel demand by 60 days, but it expects the recovery to resume around the Presidents Day holiday in February.

In an interview, Chief Executive Ed Bastian said bookings for international travel were down but he sounded confident that the transatlantic market would have a “very strong” spring and summer travel period once Omicron-driven border restrictions are lifted.

“There’s an enormous amount of pent up demand,” Bastian told Reuters. “It’s going to be very active.”

He expects business travel to pick up by the middle of February.

The Atlanta-based carrier’s adjusted profit for the quarter through December came in at 22 cents a share, beating analysts’ average estimate of 14 cents per share, according to IBES data from Refinitiv, marking the second profitable quarter in a row.

The company estimates revenue in the March quarter will recover to 72 percent to 76 percent of 2019 levels. It expects to restore 83 percent to 85 percent of pre-pandemic capacity in the current quarter.

Its capital expenditure in the quarter is projected to increase by about 69 percent from the December quarter to $1.6 billion.

Peter McNally, global sector lead for industrials, materials, and energy at research firm Third Bridge, said the airline is “managing well” despite the challenges facing the industry.

“After nearly two years of raising liquidity and balance sheet protection, Delta is investing in its future,” McNally said.

Delta’s shares were up 1.7 percent at $41.32 in opening trade.

Operational Disruptions

A surge in COVID-19 cases, driven by the Omicron variant, has caused havoc for the airline industry. An increase in daily employee sick calls, as well as a series of winter storms, have led to mass cancelations of flights.

Epoch Times Photo
A woman and her child speak with an airline attendant at the George Bush Intercontinental Airport in Houston, Texas, amid flight cancelations and delays, on Jan. 6, 2022. (Brandon Bell/Getty Images)

Since Christmas Eve, U.S. airlines have canceled more than 31,300 flights, or about 7 percent of the scheduled total, according to flight-tracking service FlightAware.

Delta had to cancel more than 2,000 flights. The airline, however, said its operation has stabilized over the past week, with cancelations declining to less than 20 flights a day.

Yet, operational disruptions are projected to add to cost pressures in the current quarter.

Bastian said 8000 Delta employees have contracted the virus since Omicron became the dominant variant. The case counts, however, have been declining over the last week, he said.

“We have more and more people coming back into the operation than new people getting impacted by the virus,” he said.

Last month, the company asked the Centers for Disease Control and Prevention to soften quarantine guidelines for fully vaccinated individuals who experience breakthrough COVID-19 infections, warning the long quarantines may “significantly impact our workforce and operations.” Other airlines followed Delta’s request.

The CDC last month agreed to shorten the recommended isolation time to five days from the previous guidance of 10 days.

Bastian said the quarantine guidelines were helpful in getting people out of isolation and back to work. He said the company is “strongly” encouraging its employees at day five to get tested and not to come back until they’re confident they are well.

 By Rajesh Kumar Singh

Reuters

Follow



Source link

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.