The COVID-19 pandemic caused an unprecedented plunge in air travel demand during 2020. Nevertheless, no major U.S. airlines filed for bankruptcy last year. Airlines' efforts to cut costs and shore up their balance sheets over the past decade -- combined with generous government aid -- prevented an industrywide catastrophe.

Still, some airlines have fared better than others. Delta Air Lines (NYSE:DAL) avoided the worst damage during the pandemic. The airline giant will provide another update on its turnaround progress later this week when it reports its fourth-quarter results. Here's what investors should look for in the upcoming earnings report.

A Delta Air Lines plane landing on a runway

Image source: Delta Air Lines.

Another quarter of progress

Following a downturn in case numbers in the late summer, the COVID-19 pandemic took a turn for the worse in the U.S. last fall. By early December, the U.S. was reporting an average of more than 200,000 new cases a day, up from around 35,000 just three months earlier.

This surge didn't stop people from traveling in large numbers for the holidays. During the last two weeks of 2020, the TSA screened an average of more than 1 million passengers per day. TSA passenger throughput was still down 57% year over year. Yet that was a huge rise compared to the week of July 4, when throughput fell 73% year over year -- not to mention last April, when throughput plunged more than 95% year over year.

As a result of the uptick, Delta stated in early December that it expected daily cash burn to average between $12 million and $14 million for the fourth quarter. That's down from $24 million in the third quarter. This was actually $2 million worse than management's initial projection, reflecting the worsening state of the pandemic.

In the same update, Delta Air Lines CEO Ed Bastian estimated that the company's Q4 revenue would recover to around 30% of 2019 levels. Analysts have slightly higher expectations, on average. They're projecting that fourth-quarter revenue will fall 68% to $3.66 billion. The analyst consensus also calls for an adjusted loss of $2.48 per share, which is a bit better than Delta's Q3 adjusted loss of $3.30 per share.

Looking for a balance sheet update

With the vaccine rollout starting to ramp up, Delta and other airlines are starting to pivot toward recovery mode. That makes balance sheet strength essential.

A Delta Air Lines plane parked on the tarmac

Image source: Delta Air Lines.

Delta Air Lines ended September with $34.9 billion of debt. However, it also had over $20 billion of unrestricted cash and investments, thanks to its aggressive efforts to raise cash during 2020. The company used some of this cash to pay down $5.6 billion of debt in early October. That left it with $2.3 billion of remaining maturities through the end of 2021.

Of course, investors will get details about Delta's year-end balance sheet this week. However, it will be even more important to look out for projections about how the balance sheet will evolve during 2021. The new payroll support funding included in last month's COVID-19 relief bill will help in a huge way. Based on Delta's previous payroll support proceeds, the company could be eligible for up to $2.4 billion of grants, plus about $1 billion of low-interest loans. This should fully offset cash burn over the next few months, providing a bridge to the spring, when Delta expects to return to positive cash flow.

Any word on the management search?

Finally, Delta Air Lines has some holes in its management team to fill. Chief Operating Officer Gil West -- who helped turn Delta into one of the most reliable airlines in the world over the past decade -- retired at the end of September. A little more than a month later, CFO Paul Jacobson left the company, after having delayed his retirement plans earlier in the year to help Delta respond to the pandemic.

Having the right people in these roles will be important to Delta's recovery efforts over the next few years. Even if the airline doesn't announce any new appointments in conjunction with the earnings report, investors should look out for any information about the status of the hiring process.

It will take years for air travel demand to recover from the COVID-19 pandemic. Business travel demand might never fully recover. However, if Delta can show that it's confronting these challenges proactively, that would put it way ahead of the pack in preparing for the recovery period.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.