Delta Air Lines’ second quarter results showed that domestic leisure flying is strong, domestic business travel is recovering and international travel remains weak.
“We’re in a full recovery in our business, led by the U.S. consumer,” Delta CEO Ed Bastian said on CNBC early Wednesday, citing an “acceleration in the last 60 days.”
“We’ve been losing $3 billion a quarter,” Bastian noted, citing the second quarter loss of $881 million and adding, that Delta will be “solidly profitable in the third quarter.”
Domestic leisure travel is at the heart of Delta’s recovery. In fact, a staggering 84% or $4.5 billion of passenger revenue came from domestic travel. Second was Latin America, with $485 million or 10%. Trans-Atlantic was $288 million or 5% and Pacific was just 2% or $88 million.
Corporate travel is coming back more slowly. Delta expects corporate travel at 60% of pre-pandemic level in September, up from 20% in March and 40% in June. Bastian said future corporate travel growth is lined to office re-openings. “People are still working from home,” he said. “They will be back in their offices no later than the first of the year.”
Regarding the impact of the Delta variant of the coronavirus on travel, Bastian said, “We haven’t seen any impact at all from the variant. People are ready to go.” He said that 72% of Delta’s employees and a “vast majority” of its passengers have been vaccinated.
Asked when the U.S. will open to travelers from Europe, Bastian responded, “I don’t know. The White House isn’t ready to open our boarders yet.”
In its earnings release, Delta said the steady improvement in corporate travel was “driven by increased vaccination rates, the re-opening of offices and improvements in demand in business-heavy markets like New York and Boston.”
Another positive sign, the carrier said, is that “the booking curve normalized as customers made future travel plans: Average daily net cash sales, defined as tickets purchased less tickets refunded, doubled compared to the March quarter and were 20 percent higher than our initial internal forecast.
“For the month of June, our average daily net cash sales were 70% restored to 2019 levels and roughly 10 points ahead of revenue recovery as consumers continue to make future travel plans.”
In another trend that appears to be industry wide, Delta said that “premium cabins outperformed main cabin where demand is strongest: Domestic and short-haul Latin premium revenue outperformed main cabin revenue recovery by 5 to 10 points during the quarter. This recovery is expected to be reflected at a system level as premium revenue in other entities continues to improve with the return of business and international travel at scale.”
Total revenue per available seat mile was 14.68 cents, down 16% from two years ago, while cost per available seat mile was 14.43 cents. CASM ex fuel was 11.42 cents.
The carrier said its adjusted pre-tax loss of $881 million excludes $1.5 billion of benefit related to the first and second payroll support program extensions and mark-to-market adjustments on investments. The Bloomberg consensus expectation was for a loss of $898 million.
Excluding items, the per share loss was $1.07, compared with an estimated loss of $1.42.
Total revenue was $7.1 billion, ahead of an estimated $6.2 billion. Excluding refinery sales, adjusted revenue was $6.3 billion, down 49% from the second quarter of 2019 but better than guidance.
Delta generated $1.9 billion of operating cash flow, $1.5 billion of free cash flow and $195 million in adjusted free cash flow.