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Delta Air warns of loss in current quarter on Omicron turbulence By Reuters

© Reuters. FILE PHOTO: Delta Air Lines 737 passenger planes are seen lined up on a runway where they are parked due to flight reductions made to slow the spread of coronavirus disease (COVID-19), at Atlanta Hartsfield-Jackson International Airport in Atlanta, Georgi

By Rajesh Kumar Singh

CHICAGO (Reuters) -Delta Air Lines Inc on Thursday reported higher quarterly earnings on the back of strong holiday travel demand, but warned of a loss in the quarter through March due to turbulence caused by the Omicron coronavirus variant.

“Despite expectations for a loss in the March quarter, we remain positioned to generate a healthy profit in the June, September and December quarters, resulting in a meaningful profit in 2022,” Dan Janki, Delta’s chief financial officer, said in a statement.

Delta said the Omicron variant will likely delay the recovery in travel demand by 60 days, but it expects the recovery to resume around the Presidents Day holiday in February.

In an interview, Chief Executive Ed Bastian said bookings for international travel were down but he sounded confident that the transatlantic market would have a “very strong” spring and summer travel period once Omicron-driven border restrictions are lifted.

“There’s an enormous amount of pent up demand,” Bastian told Reuters. “It’s going to be very active.”

He expects business travel to pick up by the middle of February.

The Atlanta-based carrier’s adjusted profit for the quarter through December came in at 22 cents a share, beating analysts’ average estimate of 14 cents per share, according to IBES data from Refinitiv, marking the second profitable quarter in a row.

The company estimates revenue in the March quarter will recover to 72% to 76% of 2019 levels. It expects to restore 83% to 85% of pre-pandemic capacity in the current quarter.

Its capital expenditure in the quarter is projected to increase by about 69% from the December quarter to $1.6 billion.

Peter McNally, global sector lead for industrials, materials and energy at research firm Third Bridge, said the airline is “managing well” despite the challenges facing the industry.

“After nearly two years of raising liquidity and balance sheet protection, Delta is investing in its future,” McNally said.

Delta’s shares were up 1.7% at $41.32 in opening trade.

OPERATIONAL DISRUPTIONS

A surge in COVID-19 cases, driven by the Omicron variant, has caused havoc for the airline industry. An increase in daily employee sick calls as well as a series of winter storms have led to mass cancellations of flights.

Since Christmas Eve, U.S. airlines have canceled more than 31,300 flights, or about 7% of the scheduled total, according to flight-tracking service FlightAware.

Delta had to cancel more than 2,000 flights. The airline, however, said its operation has stabilized over the past week, with cancellations declining to less than 20 flights a day.

Yet, operational disruptions are projected to add to cost pressures in the current quarter.

Bastian said 8000 Delta employees have contracted the virus since Omicron became the dominant variant. The case counts, however, have been declining over the last week, he said.

“We have more and more people coming back into the operation than new people getting impacted by the virus,” he said.

Last month, the company asked the Centers for Disease Control and Prevention to soften quarantine guidelines for fully vaccinated individuals who experience breakthrough COVID-19 infections, warning the long quarantines may “significantly impact our workforce and operations.” Other airlines followed Delta’s request.

The CDC last month agreed to shorten the recommended isolation time to five days from previous guidance of 10 days.

Bastian said the quarantine guidelines were helpful in getting people out of isolation and back to work. He said the company is “strongly” encouraging its employees at day five to get tested and not to come back until they’re confident they are well.


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