The Chilling Things Delta Said about the Airline Business, the 90% Collapse in Q2 Revenues, and Why Some Demand Destruction May Be “Permanent”
Shares go to heck after the mother of all revenue-warnings, plunge 20% in two days, including 7% after hours. Its disclosure confirms Buffett’s decision to dump his airlines in mid-crash.
Delta Airlines came out with the mother of all revenue-warnings when it said in an SEC filing this morning that its revenues in the second quarter, ending June 30, would collapse by 90% compared to the second quarter last year.
In addition to the collapse of demand, it has “experienced significant ticket cancellations” (refunds are counted as negative revenues), and it has waved change fees, which used to be a big profit center, and it is giving out “other refunds,” and they all “have negatively affected our revenues and liquidity, and we expect such negative effects to continue.”
And it cannot predict the effects of this unpredictable future, not even the near-term effects. “The longer the pandemic persists, the more material the ultimate effects are likely to be,” Delta said. “It is likely that there will be future negative effects that we cannot presently predict, including near term effects.”
It added a slew of dismal data points and warnings, along with the hoops it has already jumped through and still needs to jump through to stay in business, including billions of dollars in help from the taxpayer. It was a doom-and-gloom report that not even a sworn doom-and-gloomer would have been able to imagine not too long ago.
Delta’s shares dropped 7.4% during regular hours, and another 7.0% after hours, to $29.40, after having already dropped 7.6% yesterday. It seems, some people knew yesterday what Delta would announce this morning. Over those two days combined, including after hours today, shares have plunged 20.3%.
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