MIAMI – After a year of burning through piles of cash to survive, airlines are seeing a return to profitability in the near future.
Delta Air Lines (DL), for instance, has been burning approximately US$12m per day in Q1 2021. That works out to about US$1bn per quarter. According to a report on InvestorPlace.com, the company said that it had US$16.7bn in liquidity at the end of December. Therefore, DL could survive for another year, even if travel does not pick up and cash burn stays level.
However, with mass vaccinations and pent up travel demand, during a conference call this week, DL management forecast an “inflection point” during Q2 where cash flow breakeven will occur.
In plain language, by the end of Q2 or early Q3, Delta expects to report a positive free cash flow. Delta Air Lines is in the best financial shape compared to most other airlines, says investorplace.com, and is likely to be one of the first to achieve positive cash flow.
Alaska (AS) and United (UA) are also looking toward breaking even soon.
An article on Skift.com quotes United CEO Scott Kirby as saying, “Assuming the current bookings trajectory continues, we’d expect core cash burn to be positive going forward.” However, he acknowledged that there is “still a lot of hard work” ahead, not least in turning positive cash flow into profits. UA lost US$8.8m before taxes in 2020.
TSA Numbers Improving
Transportation Security Administration (TSA) screening numbers typically come in now at above a million people a day after a year mostly well below that number, Skift reports. TSA screened 1.3 million people on Sunday, March 14, which is strong for 2021, but is still 41 percent below 2019 levels.
American sees its recovery like this – reported by Edward Russell on Twitter.
But Business Travel Is An Unknown
And a recovery in business travel is still anyone’s guess. Skift reports Southwest Airlines CEO Gary Kelly saying at a Washington Post Live event Monday as saying, “It’s going to take a while for the business travel to come back, and it may never get back to pre-pandemic levels — there’s just no way to know that right now.”
Kelley cited the five-year recoveries in corporate travel after past economic crises as a base timeline but added that, with how Covid-19 has changed how we work, it could take much longer. Business travel is down roughly 90 percent from normal levels at Dallas-based Southwest, Kelly said.
Featured Image: Delta Boeing 767-300ER. Photo: Daniel Gorun/Airways