Delta Air Lines’ (DAL Quick QuoteDAL - Free Report) first-quarter 2022 loss (excluding 25 cents from non-recurring items) of $1.23 per share was narrower than the Zacks Consensus Estimate of a loss of $1.28. With Omicron hampering travel plans in the early part of the first quarter of 2022, the carrier incurred a loss after delivering earnings in the last two quarters of 2021.

However, with the threat of the omicron variant subsiding, air-travel demand was exceptionally strong in the month of March. Upbeat demand led to DAL earning a profit in March with the adjusted operating margin reaching almost 10%.

Also driven by buoyant demand, Delta gave a bullish outlook for the second quarter of 2022. The upbeat view seemed to please investors. As a result, the stock gained in pre-market trading. Per Delta President Glen Hauenstein, "In the June quarter, we are successfully recapturing higher fuel prices and expect our revenue recovery to accelerate to 93 to 97 percent with unit revenue up double digits compared to 2019." Operating margin (adjusted) for the June quarter is anticipated in the 12-14% range.

Coming back to first-quarter 2022 results, Delta’s revenues came in at $9,348 million, which not only beat the Zacks Consensus Estimate of $9,063.5 million but also soared in excess of 100% from the year-ago figure. The uptick in air-travel demand in the United States can be gauged from the fact that 80.5% of first-quarter 2022 passenger revenues came from the domestic markets.

Despite the year-over-year improvement in air-travel demand (particularly for leisure) in the United States as more and more Americans get vaccinated, the overall picture remains drab compared to the first-quarter 2019 scenario, mainly due to the softness in business and international travel. Consequently, passenger revenues plunged 25% from the levels recorded in the comparable quarter of 2019 to $6,907 million.

Cargo revenues surged 51% to $289 million. This was the sixth consecutive quarter when cargo revenues increased from the comparable periods levels in 2019. Cargo revenues in the reported quarter were boosted by strong demand and favorable yields. Revenues from other sources climbed significantly to $2,152 million. Total revenues in the March quarter declined 11% from the first-quarter 2019 level.

Adjusted operating revenues (which exclude third-party refinery sales) came in at $8.2 billion, reflecting a 79% recovery from the first-quarter 2019 level. Capacity in first-quarter 2022 was restored 83% of first-quarter 2019 actuals. Domestic and international passenger revenues were restored 83% and 54%, respectively.

Other Financial Details of Q1

Below we present all comparisons (in % terms) with first-quarter 2019 (pre-coronavirus levels).

Revenue passenger miles (a measure of air traffic) tumbled 25% to 38,700 million. Capacity (measured in available seat miles) contracted 17% to 51,810 million. With the fall in traffic outpacing the capacity reduction, the load factor (percentage of seats filled by passengers) was down to 75% from 83% in the comparable quarter of 2019.

Passenger revenue per available seat mile (PRASM) declined 10% to 13.33 cents. Passenger mile yield decreased to 17.85 cents from 17.93 cents in the first quarter of 2019. On an adjusted basis, total revenue per available seat mile (TRASM) deteriorated 5% to 15.75 cents in the March quarter.

Total operating expenses, including special items, increased 7% to $10,131 million. Aircraft fuel expenses and related taxes increased 6% in the reported quarter. Fuel gallons consumed decreased 22% to $751 million. With oil price moving north, the average fuel price per gallon (adjusted) increased 37% to $2.79. Non-fuel unit cost increased 15% in the reported quarter.

The airline had liquidity worth $12.8 billion at the end of the March quarter (including cash and cash equivalents, short-term investments and undrawn revolving credit facilities). Delta, currently carrying a Zacks Rank #3 (Hold), had total debt and finance lease obligations of $25.6 billion with an adjusted net debt of $20.9 billion.

Operating cash flow during the quarter was $1.8 billion. Free cash flow (after pumping $1.6 billion into the business, primarily for aircraft purchases and modifications) was $197 million.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Remaining Aspects of Q2 Outlook

All comparisons in percentage are made with second-quarter 2019 figures. For the second quarter of 2022, the carrier expects to operate at 84% of the second-quarter 2019 capacity. Non-fuel unit costs are expected to increase 17% from the second-quarter 2019 actuals.

Gross capital expenditures and adjusted net debt are likely to be $1.2 billion and $20 billion, respectively, in the June quarter. Management also expects fuel price per gallon in the $3.20-$3.35 range. Delta expects to generate strong free cash flow in the June quarter.

Stocks to Consider

Below we present some better-ranked stocks in the broader Transportation sector:

Expeditors International of Washington (EXPD Quick QuoteEXPD - Free Report) currently sports a Zacks Rank #1 (Strong Buy). EXPD is being bolstered by upbeat airfreight revenues. We expect this uptrend in airfreight revenues to aid the first-quarter 2022 results (scheduled to be out on May 3, 2022), akin to all the four quarters’ performances in 2021.

The wave of optimism surrounding the EXPD stock is evident from the 12.48% northbound revision of its current-year Zacks Consensus Estimate over the past 60 days.

Ryder System (R Quick QuoteR - Free Report) currently flaunts a Zacks Rank of 1. Improving economic and freight market conditions in the United States are likely to have aided R’s first-quarter performance. Detailed results will be out on Apr 27.