Despite a big jump in domestic leisure travel demand in March, Delta Air Lines DAL on Thursday posted its fourth huge quarterly loss since the Covid-19 pandemic landed on U.S. shores.

The $2.3 billion it lost in the quarter ended March 31, or $3.55 per share excluding special items, was significantly larger than analysts’ consensus prediction of a $3.17 loss per share.

But Delta’s leaders focused on what amounts to the positives in a conference call with Wall Street analysts and reporters.

  • They noted that while the airline averaged burning through $11 million of cash each day in the first quarter, the airline actually was, for the first time since the pandemic began, cash positive in March.
  • They expect the second quarter to be the first quarter since the pandemic began in which the carrier will be cash flow positive. The calculation of the daily rate at which a company burns through or generate cash does not factor in number of accounting-related expense items such as depreciation of equipment like airplanes and therefore is not as important as actual profits or losses. But with pandemic-battered airlines, returning to at least a cash flow positive level is viewed as an indicator of financial improvement.
  • CEO Ed Bastian said travel demand, though still lacking from high fare-paying business travelers, began surging in the second half of the first quarter. Travel bookings on Delta made in March were double those made in January, Bastian said.
  • The airline, as announced a few days ago, has begun selling the middle seats on its planes for flights on May 1 and later. It had been the last carrier still blocking its middle seats as a health safety measure. The change is in response to the big leap in leisure travel demand.

But despite the carrier’s efforts to focus on the positive signs of a leisure demand recovery, the market conditions for Delta and all other U.S. carriers remain negative and challenging.  Though it anticipates being cash flow positive in the second quarter, it also still expects its revenues to be down between 50% and 55% from the second quarter of 2019. That would be a small improvement on the first quarter, when its revenue was down 60% from the same period in 2019. In any case, the company said that in the second quarter it could post a net loss of another $1.5 billion on so, even if its daily cash burn turns into daily cash generation, as it expects. And such a net loss would be posted despite the anticipated acceptance of $2.7 billion in the second quarter from the U.S. Treasury. That will come from the federal government as part of the payroll support program Congress created last year to help airlines avoid laying off over 100,000 workers because of the impact of the pandemic on travel demand. Congress has extended that program twice since then, with the money from the third payroll support plan expected to hit carriers’ bank accounts in the second quarter.

In the 12 months ended March 31 – the period most closely corresponding to Covid-19’s measurable effect on the airline’s performance – Delta lost $10.2 billion on a Generally Accepted Accounting Practices basis, and $11.1 billion after adjusting for government loans and grants it received and other one-time accounting items.

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First quarter revenue at Delta was $4.15 billion, a little better than the $3.91 billion that had been anticipated by analysts. But the weakness of demand, and the carrier’s struggle to adapt its operations to the dramatically weaker demand environment were evident in the growing imbalance between its costs and revenues on a seat mile basis. Delta’s first quarter costs per available seat mile rose 13% vs. the first quarter of 2019, to 13.01 cents per seat mile. But its revenue earned per available seat mile fell a staggering 46% to just 9 cents per seat mile.

That huge drop in revenue per seat mile illustrates the challenge ahead for Delta – and its competitors. Even though domestic leisure travel is on the rise nicely now, leisure travelers tend to pay much lower fares. In fact, leisure travelers typically pay “below cost” fares, meaning that if 100% of the carriers’  seats are filled with leisure passengers who pay below cost fares the airline would not earn enough to cover its operating costs. That explains Delta’s long run of daily cash losses, and that of its competitors.

Meanwhile, because airlines’ costs, measure per available seat mile, were optimized for operating larger fleets and serving a “healthy” mix of business and leisure travelers – around 35% business travelers vs. 65% leisure travelers in most cases – the parking of about 350 big jets operated by the big U.S. airlines and the dramatic reduction in the number of passengers carriers means operating costs actually go up on an available seat mile basis. That’s because carriers have to continue paying for many items they don’t use as intensively or at all, like gates that now sit idle more hours of the day, lease and loan payments on planes that aren’t be used fully, or at all, continuing maintenance and other overhead costs.

Delta’s Bastian and other executives focused much of their discussion today on their expectations of significant travel demand this summer, when they expect to have all their planes back in service and to fill about 75% of their seats. But that’s still below normal summer load factors higher than 85%. And little of that expected summer traffic will be of the more lucrative business travel variety.

Bastian said that business travel demand is les than 20% of what it was at this time in 2019. Thus, prospects for actual profitability among the airlines this year are quite dim, though Delta officials, noting their somewhat better financial performance than most competitors hold out some hope of reporting modest profits in the third or fourth quarters, assuming no major flare-up of Covid-19 cases or deaths. It also assumes that leisure demand continues to be relatively strong through the year, though some travel analysts fret that leisure travel demand will drop significantly because of the “one-and-done” effect – individuals who’ve been unable to travel for fun more than a year now booking one big fun trip and then planning no further leisure trips until 2022.

In addition to a dearth of business travel demand, big airlines like Delta that compete heavily in the international market, where fares are much higher, have seen international travel demand fall more than 90% from 2019. That’s because of both restrictions on, and consumer fear of cross border travel. And there continue to be few positive indicators that some of those restrictions will be loosened or dropped by various nations, and few indications that even if those restrictions are eliminated or reduced, that either business or leisure travel demand for foreign travel will bounce back the way domestic leisure travel is rebounding now.

Investors responded mildly negatively to Delta’s report, pushing its share price down more than 3% in morning trading. Delta stock was at $46.54 in early afternoon training, still down 3.4%. Only nine days earlier, on April 6, Delta stock hit is highest price – $51.65 a share – since it’s pandemic-driven low point of $19.19 a share on May 15, last year. But the company’s share price has ended lower each trading day since as investors seemingly recognized that in their exuberance over reports of the growing demand among leisure travelers the share price had gotten pushed a little too high for their comfort.