Delta Air Lines Continues to Expect Positive Cash Flow By Spring

Delta Air Lines continues to expect to achieve positive cash flow by the spring, the carrier’s CEO Ed Bastian stated in a New Year note to employees.

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The airline had earlier stated on its 3Q conference call that it expects an average daily cash burn rate of $10 million per day in the December month, with “good line of sight to positive cash flow by the spring.” Delta (DAL) and other airlines have been immensely hit by dismal demand due to pandemic-led travel restrictions.

In the note, Delta’s CEO stated, “It’s likely that we’ll experience two distinct phases during the next 12 months. The first will look a lot like 2020, with travel demand deeply depressed and our focus on ensuring the health and safety of our people and customers. The second phase will begin only when we reach a turning point with widely available vaccinations that spur a significant return to travel, particularly business travel.”

“As difficult as 2020 was, in many ways I expect the next 12 months to be even more challenging,” added Bastian.

Delta’s 3Q revenue plunged 76% year-over-year to $3.1 billion and the company’s daily cash burn averaged $24 million in the quarter. Shares have been rising since November in reaction to positive COVID-19 vaccine news. However, shares were still down 31.3% in 2020. (See DAL stock analysis on TipRanks)

In mid-December 2020, Credit Suisse analyst Jose Caiado reiterated a Buy rating and $47 price target on Delta. In a note to investors, Caiado stated, “We see DAL as best positioned among the legacy network carriers with a (relatively) good balance sheet (incl. access to unsecured capital markets), a strong domestic network, upside from an eventual international/ corporate recovery, and a differentiated commitment to minimize dilution of equity owners, which peers continue to do.”

Overall, 10 Buys, 4 Holds and 1 Sell add up to the Street’s cautiously optimistic Moderate Buy analyst consensus for Delta. The average price target of $44.83 indicates an upside potential of 11.5% in the 12 months ahead.