Question

Delta airline common stocks and the impact fo current lockdown due to the  epidemic of COVID-19 on its stock price

Answer 1

Answer:

Introduction:

Delta Air Lines, Inc., typically referred to as Delta, is one of the major airlines of the United States and a legacy carrier. It is headquartered in Atlanta, Georgia.

The airline, along with its subsidiaries and regional affiliates, including Delta Connection, operates over 5,400 flights daily and serves 325 destinations in 52 countries on six continents.Delta is a founding member of the SkyTeam airline alliance

Delta has nine hubs, with Atlanta being its largest in terms of total passengers and number of departures.It is ranked second among the world's largest airlines by number of scheduled passengers carried, revenue passenger-kilometers flown, and fleet size. It is ranked 69th on the Fortune 500

Now As on date, 09.04.2020 Stock price is 24.39 USD

At the time of 17th Jan 2020 the Stock Price is 62.03 USD

Impact current lockdown due to the  epidemic of COVID-19

Delta Air Lines has suspended several technology projects due to the Covid-19 pandemic, impacting over 1,300 jobs at its outsourcing vendors in its home country and in India.
Delta has cancelled thousands of flights in the United States and to international destinations in Europe, the UK and India, hurting its operations.
Several countries have closed their airspace to passenger planes as they attempt to contain the spread of the virus

Delta outsources contracts to Tata Consultancy Services NSE 3.56 %, Cognizant and IBM.

It is as yet unclear to what extent each company has been impacted.

“We have made a tough, but necessary decision to reduce contractor positions as Delta manages the impact of the Covid-19 pandemic to its business,” a Delta spokesperson told ET. “Several service providers which provide contractor work support to Delta and other companies, have informed approximately 1,300 contractors within the IT organization that their work assignments at Delta are suspended.”

Delta is giving employees of its vendors an “opportunity to be placed with other clients,” the spokesperson said

When contacted, a TCS spokesperson said: "We have strategic relationships with our customers in this sector (airlines and hospitality) and we are partnering with them closely to help them navigate through the crisis. We will be unable to provide any further customer specific information.”

• Top priority is protecting the health and safety of customers and employees
• In response to demand declines, company will remove 15 points of system capacity

In addition to the significant efforts under way to protect the health and safety of its customers and employees, Delta Air Lines is announcing additional steps to address the financial impact of the COVID-19 (coronavirus) outbreak.

“In the weeks since COVID-19 emerged, Delta people have risen to the challenge, taking every possible action to take care of and protect our customers during a stressful time,” said Delta CEO Ed Bastian. “As the virus has spread, we have seen a decline in demand across all entities, and we are taking decisive action to also protect Delta’s financial position. As a result, we have made the difficult, but necessary decision to immediately reduce capacity and are implementing cost reductions and cash flow initiatives across the organization.”

Bastian added, “Over the last 10 years, we’ve transformed Delta by strengthening the balance sheet, diversifying our revenue streams and enhancing operational and financial flexibility. The environment is fluid and trends are changing quickly, but we are well positioned to manage this challenge and are taking actions to ensure that Delta maintains its leadership position and strong financial foundation.”

Capacity

To align capacity with expected demand, Delta is reducing system capacity by 15 points versus its plan, with international capacity reduced by 20-25 percent, and domestic capacity reduced by 10-15 percent. The company will continue to make adjustments to planned capacity as demand trends change.

By region, reductions include:

Entity	% of Total FY19 Revenue	Capacity Reductions
Pacific	6%	Down 65%
Trans-Atlantic	15%	Down 15-20%
Domestic	72%	Down 10-15%
Latin	7%	Down 5%

Expenses

Delta is undertaking cost reduction initiatives, including:

• Instituting a company-wide hiring freeze and offering voluntary leave options
• Parking aircraft, and evaluating early retirements of older aircraft

In addition, the recent fuel price decline provides approximately $2 billion of full-year expense benefit.

Balance Sheet and Cash Flow

Delta has also made the following cash flow decisions:

• Deferring $500 million in capital expenditures
• Delaying $500 million of voluntary pension funding
• Suspending share repurchases

Delta has an investment-grade balance sheet, providing ready access to capital markets and bank financing. The company recently announced the issuance of $1 billion of secured aircraft debt at a blended rate of 2.09 percent and intends to use the proceeds to fund $1 billion of scheduled debt maturities in March.

Delta’s leverage ratio is at the low-end of its targeted range of 1.5 to 2.5 times adjusted debt to EBITDAR. Liquidity is strong and expected to be at least $5 billion at the end of the March quarter. In addition, Delta has approximately $20 billion of unencumbered assets, including $12 billion in aircraft.

Conclusion:

Delta Stock price is fall down Approx $ 40 USD due to current lockdown and epidemic of COVID-19