Delta books first loss in more than five years and plans to halve $100 million-a-day cash burn amid coronavirus travel slump

Delta Air Lines‘ on Wednesday posted its first quarterly loss in more than five years and issued a bleak spring forecast as the coronavirus continues to sap travel demand.

Airlines are among the industries hit hardest by coronavirus and harsh measures to stop it from spreading, like stay-at-home orders. Carriers including Delta were granted a portion of $25 billion in government grants and loans dedicated to paying employees through Sept. 30.

The Atlanta-based carrier’s revenues plunged 18% in the first three months of the year to $8.6 billion. CEO Ed Bastian said second-quarter revenue will likely fall 90% from the same period of 2019 and forecast a long recovery, telling employees that the airline will be smaller in the future.

“We don’t know when it will happen, but we do know that Delta will be a smaller airline for some time, and we should be prepared for a choppy, sluggish recovery even after the virus is contained,” he wrote in a staff note. “I estimate the recovery period could take two to three years. I hope it’s sooner, but we need to be realistic in our planning.”

The airline spent the quarter shoring up cash and slashing expenses to combat the sharp drop in revenue. Delta’s is carrying about 5% of its normal passenger loads, Bastian told CNBC.

The carrier burned through $100 million a day at the end of March, a rate it expects to halve by the end of the second quarter.

Delta posted a net loss of $534 million for the first three months of the year. On an adjusted basis, Delta reported a per-share loss of 51 cents, compared with analysts’ estimates for a 70 cent per-share loss in the first quarter. Delta were down more than 2.8% in afternoon trading.

Delta raised $5.4 billion since the end of March, including a $3 billion term loan and $1.2 billion from aircraft sale leasebacks. It also drew down $3 billion of an existing credit facility and cut planned capital expenditures by the same amount.

“The decade of work we put into the balance sheet to lower debt and build unencumbered assets has been critical to our success in raising capital and we expect to end the June quarter with approximately $10 billion in liquidity,” Delta’s CFO Paul Jacobson said in a release.

Delta said it expects to get about $5.4 billion in the government payroll aid — $3.8 billion in grants and a $1.6-billion unsecured 10-year loan. It received the first installment on Monday. The $2.2 trillion in coronavirus relief Congress passed last month sets aside a separate $25 billion in loans for airlines. Delta said it considering applying and that it is likely eligible for about $4.6 billion.

Delta late Wednesday said it will offer $1.5 billion of secured notes due in 2025 and that it’s lined up a separate $1.5 billion term loan. 

The new debt will be backed by airport slots, gates and routes, including at New York’s LaGuardia Airport, John F. Kennedy International Airport, Reagan National Airport and London’s Heathrow Airport among others.