By Yasin Ebrahim
Investing.com - Delta Air Lines warned revenue was expected to plunge 80% in the second-quarter year-on-year as the Covid-19 pandemic has wreaked havoc on travel demand. The company said it has secured a line of credit to weather the impact, though continued to make a case for government assistance.
Delta Air Lines (NYSE:DAL) was up 0.19% in after-hours trading.
"Our revenue outlook continues to deteriorate in the short term with the decline in travel demand. We’re now projecting our June quarter revenues will be down by $10 billion compared to a year ago –an 80 percent reduction. It’s also clear, given the underlying damage the virus has created to the overall economy, that demand recovery will take an extended period once the virus is contained," Delta Air Lines said in an internal memo.
"In light of the unprecedented challenges facing us, we have entered into a $2.6 billion secured credit facility and are drawing down $3 billion under our existing revolving credit facilities. This will help fortify our cash position in the coming weeks and months. To put this in context, despite all the self-help measures we are taking, we are currently burning roughly $50 million in cash each day," it added.
The warning comes as the airline industry has called on the U.S government for financial support at a time when many fear businesses in the sector face extinction amid a plunge in travel demand due to the rapid spread of the coronavirus.
"We also continue working with the President and Congress on disaster relief assistance, which is vital to protect our industry’s critical role in our nation’s economy.
"Amid those discussions, in recent days some critics have argued that the airlines have not been good stewards of our money during our profitable years," Delta said, but hit back against those claims, highlighting its efforts to shore up its balance sheet. "We put 50 percent of our operating cash flow back into our business by investing in our people and our customers, use 30 percent to pay down debt, and return 20 percent to our owners."