The airlines sector was severely impacted by the disruption caused by the COVID-19 pandemic in 2020. A year later, the industry is still limping its way to a recovery. In the past two weeks, several airline companies reported their earnings for the first quarter of 2021. Let’s take a broad look at how the year started out for them:
Revenues and profits
Most of the major players reported double-digit revenue declines and quarterly losses on an adjusted basis for Q1 2021. Delta Air Lines (NYSE: DAL) was the first to release its results reporting a 60% drop in operating revenue and an adjusted loss of $3.55 per share compared to earnings of $0.96 per share in the first quarter of 2019.
United Airlines Holdings (NYSE: UAL) followed with a 60% decrease in revenue and an adjusted loss of $7.50 per share compared to the first quarter of 2020. American Airlines Group Inc. (NASDAQ: AAL) posted a 53% year-over-year decrease in revenue and an adjusted loss of $4.32 per share. Southwest Airlines Co. (NYSE: LUV) witnessed a 52% YoY drop in revenue and delivered an adjusted loss of $1.72 per share.
Operating revenues of Alaska Air Group (NYSE: ALK) were down 51% versus Q1 2020 while adjusted loss amounted to $3.51 per share. JetBlue Airways Corporation (NASDAQ: JBLU) reported a 54% drop in revenues compared to Q1 2020 along with an adjusted loss of $1.48 per share.
Amid the pandemic, airline companies resorted to cutting costs in order to preserve cash and stay afloat. This was done through capacity reductions, salary cuts and other expense reductions. All the aforementioned players managed to lower their operating expenses and bring down their cash burn during the first quarter of 2021.
Delta saw a 41% reduction in operating expenses while United saw a 49% decline compared to the first quarter of 2019. Meanwhile, American, Alaska and Southwest managed to halve their costs compared to the first quarter of 2020 and JetBlue saw a 47% YoY decline in Opex. Cash burn went down in the quarter and Delta, American and JetBlue saw cash generation turn positive in March.
The airline industry expects demand to pick up in the coming months as COVID-19 vaccinations are rolled out and people look forward to taking the trips they had put off during the previous year. Most airline companies are seeing an uptick in domestic leisure travel trends and expects this to get stronger going into the summer. In Q1, Delta saw its domestic leisure bookings 85% recovered to 2019 levels. JetBlue and Southwest also saw a pickup in leisure travel demand from mid-February.
Corporate and international travel remain soft and are anticipated to take time to recover. Delta is seeing an improvement in corporate travel but international travel remains muted. United, on the other hand, is looking to take advantage of pent-up demand for travel to countries where vaccinated travelers are permitted. If allowed, the company will resume flights to places like Greece and Iceland.
Airline companies continue to expect their revenues and capacity to be down in the second quarter of 2021 compared to the same period in 2019. Delta expects revenue to decline 50-55% and scheduled capacity to be down approx. 32% in the second quarter. United expects total revenue per available seat mile to be down approx. 20% and capacity to be down around 45% in Q2 2021 versus Q2 2019.
American Airlines expects total revenue to be down around 40% and capacity to be down 20-25% versus 2019. JetBlue expects revenues to decline 30-35% and capacity to be down approx. 15% in Q2. Southwest expects revenues to be down 40-45% in April and then 35-40% in May.