Delta Air Lines Is Ready For Take-Off

seekingalpha.com
5 min read
fairly easy
DAL is one of the best airlines out there and will come out on top when this is over.The company has enough liquidity and there is an implied government handout on the way.With pent-up demand and lower fuel costs in the future, the future looks bright for Delta.
The company has enough liquidity and there is an implied government handout on the way.

DAL is one of the best airlines out there and will come out on top when this is over.

Thesis Summary

Delta Airlines Inc, (DAL) is by many measures one of the best airlines in the U.S. The company is more than well equipped to weather the storm and could likely receive help from the government. With early signs that the worst might be behind us, both in terms of virus and market, this may be the right time to open a position.

Company Overview

Delta Airlines has been one of the best performing players in the industry over the last few years. They have shown operational excellence and strong growth compared to some of their peers. The last three years, especially, have been outstanding.

Source: Annual Report 2019

Three-year CAGR has been about 6%. Furthermore, the company has increased revenues at the same time it has increased profitability. 2019 saw an EBITDA growth of 17.24% thanks to other things to lower aircraft and fuel costs.

It is no secret that Delta can make money. The problem is that the current outbreak has set cast a shadow of uncertainty over the airline industry. Sending all the stocks tumbling over 50%. But at the end of the day, when this is over, people will still want to fly, which means there is a lot of money to be made by picking the right winners.

Source Annual Report

In times of distress, there is nothing to do but hold tight and weather the storm. This, Delta can do thanks to its strong balance sheet. The companies D/E ratio is below, at 0.92, and while there is a substantial amount of long-term debt, this is normal for the airline industry. Current liabilities amount to around $20 billion, half of which could be covered cash and recent loans. The airline borrowed $5.6 billion along with $1.0 billion in secured equipment notes, amounting to total liquidity of up to $9.6 billion before any losses in the Q1 quarter.

Delta will suffer greatly from…
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