Delta's Q2 Revenues May Be Hit By $10B Due To Coronavirus

As coronavirus continues to take its toll on air travel demand, Delta Air Lines, Inc. (NYSE:DAL) expects second-quarter 2020 revenues to be slashed by $10 billion, indicating an 80% year-over-year decline. With the large-scale damage already caused by the pandemic to the economy as a whole, the airline anticipates travel demand to take a long period of time to recover even after the virus fears are checked.

To combat the unprecedented crisis, the airline has been taking several cost-reduction initiatives. To this end, the carrier plans to reduce capital expenditures by a minimum of $2 billion this year. It is also offering voluntary short-term unpaid leaves, apart from freezing hiring. The Atlanta, GA-based airline also suspended share repurchases and its board has now voted to halt future dividend payouts as well.

Regardless of these measures, the Zacks Rank #3 (Hold) company is “burning roughly $50 million in cash each day”.Hence, to preserve cash and solidify liquidity position, the company entered into a $2.6 billion secured credit facility. Additionally, it is drawing down $3 billion under its existing revolving credit facilities. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Delta have plunged 61.7% since the beginning of February, compared with the industry’s 57.7% decline, due to dwindling demand in the wake of coronavirus.

Last week, Delta decided to cut systemwide capacity to the tune of 70% until there is a recovery in air-travel demand. Notably, over the next two to three months, Delta’s international flights will be reduced to more than 80%. With shrinking air travel demand, other U.S. carriers like American Airlines (NASDAQ:AAL) and United Airlines (NASDAQ:UAL) have also slashed capacity dramatically. While American Airlines reduced international flights by 75%, United Airlines reduced international flight schedules by 90% for April. Meanwhile, LATAM Airlines (NYSE:LTM) plans to cut back capacity by 70% due to this global health peril.

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