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Delta Air Lines' (DAL) Revenue Guidance for Q2 Improves

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With air-travel demand for leisure on an upswing in the United States, management at Delta Air Lines (DAL - Free Report) gave an improved outlook for the June–quarter revenues.

At the Bernstein Strategic Decisions Conference, Delta predicted second-quarter revenues (on an adjusted basis) in the $6-6.2 billion range, indicating a 50-52% decline from the second-quarter 2019 actuals. This also suggests an improvement from the past guidance issued in April, which had projected a 50-55% decline. The Zacks Consensus Estimate for second-quarter 2021 revenues is currently pegged at $6.35 billion. Owing to the betterment in air-travel demand, load factor (% of seats filled by passengers) and yields are also showing signs of recovery throughout the June quarter.

Adding to this bullishness, Delta anticipates domestic leisure travel in the current month to be more than 100% restored from the 2019 actuals. Pre-tax loss for the second quarter is now expected in the $1-$1.2 billion range, which again is an improved outlook from the previous estimate of $1-$1.5 billion. The company, currently carrying a Zacks Rank #3 (Hold), expects to generate pre-tax profit in the latter half of 2021.

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Scheduled and sellable capacities for the June quarter are still expected to decline 32% and 40%, respectively, from the second-quarter 2019 reading. Capital expenditures are reiterated at roughly $550 million. The guidance for second-quarter adjusted net debt is expected to be below $19 billion (earlier guidance was in the $19-$19.5 billion band). Fuel price per gallon for the June quarter is anticipated in the $2-$2.15 band (previous estimate: $1.85-$1.95).

Non-fuel unit costs are now predicted to increase roughly 9% from second-quarter 2019 actuals (earlier guidance was an increase in the 6-9% band). Delta expects to reduce non-fuel unit costs below the reported 2019 levels by the final quarter of 2021 through its efforts to enhance efficiencies. Available seat miles (a measure of scheduled capacity) in fourth-quarter 2021 are projected to be roughly 85% of fourth-quarter 2019 actuals. The company hopes to achieve the revenue levels registered in 2019 by 2023 or even earlier, driven by the company’s cost-management actions.

Apart from Delta, other U.S. carriers like United Airlines (UAL - Free Report) , American Airlines (AAL - Free Report) and Southwest Airlines (LUV - Free Report) are being aided by the uptrend in leisure-travel demand.

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