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Delta (DAL) recently released their Q3 results and we finally have some "good news" to report! It appears that they are finally in the clear in regards to their liquidity constraints. Although not the "killer" news you all were wanting, it is a step in the right direction and in what should be a long turn around in their fundamentals. In the near term we will look towards ticket sales and overall traffic patterns to see if there is any pick up in global travel.
Now, let's discuss our biggest takeaways from their recent earnings announcement:
PRASM (passenger revenue per available seat-mile) was down, ALOT. It fell almost 25% below consensus expectations. This is a major red flag as this statistic is something we look at closely when trying to time a rebound.
Corporate Travel seems to finally be picking back up. This is an important statistic because corporate travel represents the bulk of most airlines revenue and therefore if we see this tick back up, we can start to be bullish on the sector. While this probably won't happen till 2021 and beyond (per their management team) it is another step in the right direction.
Cash burn remains under control. Q3 cash burn was ~$24M per day and their management team guiding to Q4 cash burn of $10-12 mm per day. We like to see this normalization and will continue to keep our eye on it.
We remain overweight the stock - in large part due to how depressed the name is YoY. DAL continues to manage whatever it can control well and their management team has alluded to structural gains on the cost side of the house. We continue to believe that their is growing evidence of returning air traffic that gives investors confidence in Airlines as a reopening trade. This can drive the next leg of the stock and the industry at large, higher.
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