Delta expects Omicron to post a quarterly loss, but expects a profit in 2022 when travel rebounds
Delta Airlines said Thursday that an increase in the omicron variant of Covid-19 would lead to a loss in the first quarter, but it still expects travel demand to recover and turn a profit this year.
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| Delta expects Omicron to post a quarterly loss |
In the fourth quarter, Delta posted its highest revenue since the end of 2019, thanks in part to strong vacation bookings and more business trips. Sales of $9.47 billion exceeded analyst expectations of $9.21 billion. The company has not yet fully recovered from the Covid-19 crisis. Revenue is down 17% from $11.44 billion during the last three months of 2019, just before the start of the coronavirus pandemic.
Delta shares rose 2.7% in pre-market trading after the company announced its results.
CEO Ed Bastian said omicron is expected to delay the slight increase in travel demand by 60 days.
“The recent increase in COVID cases associated with the omicron variant is expected to impact the pace of the recovery in demand early in the quarter, with recovery momentum resuming early in the President’s Day weekend,” warned Chairman Glenn Hauenstein.
Here's how Delta fared compared to what analysts expected, based on average estimates compiled by Refinitiv:
Adjusted earnings per share: 22 cents versus 14 cents expected.
Revenue: $9.47 billion vs. $9.21 billion forecast.
Delta reported a net loss of $408 million in the fourth quarter as fuel and other costs rose, due in part to Omicron's propagation disruptions. Adjusting for individual items, Delta reported earnings per share of 22 cents, higher than the 14 cents Wall Street had expected.
For the full year, Delta posted a profit of $280 million, its first in two years, thanks to $4.5 billion in federal aid for airline labor costs during the crisis. In 2020, after a drop in travel demand, Delta recorded the largest loss in its history: $12.4 billion.
Delta is the first US airline to report fourth-quarter results and provide detailed forecasts of the impact of the variable on its business. Omicron's rapid spread has affected industries ranging from theaters to restaurants, retailers, and grocery stores.
Airlines, including Delta, have canceled thousands of flights since Christmas Eve, as a spike in COVID-19 cases among their crews left them without staff.
Delta said its business has stabilized and that omicron has caused only 1% of its flights to be canceled over the past week.
But the airline said Omicron would control short-term bookings.
"Despite expectations of a loss in the March quarter, we remain in a position to generate healthy profits in the June, September and December quarters, which will result in a significant profit in 2022," Delta Chief Financial Officer Dan Janki said in the earnings statement.
Investors have largely ignored Omron's impact on operators. Delta shares are up 3.9% this year through Wednesday, while United and American shares are up 6.3% and 3%, respectively. By comparison, the S&P 500 is down 0.84%.
Delta expects first-quarter revenue to be 24% to 28% below 2019 levels with production capacity 15% to 17% lower than it was flying three years earlier. It expects about a 15% increase in costs over 2019, excluding fuel.
Airlines compare results with 2019 to show how much business has recovered from pre-pandemic levels.
Among the challenges for Delta and other airlines this year is increasing hiring to meet travel demand, a challenge in a tight job market.
Delta executives will detail their results and expectations for 2022 from 10 a.m. to 5 p.m. called ET.
