Uber, Lyft see shortage of drivers as riders return in post-pandemic era

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Ride hailing companies Uber Technologies Inc and Lyft Inc promised Wall Street they would be back on the road to profitability and growth by the time they reported second-quarter results this week, thanks to cost-cutting done to survive the pandemic.

Now, concerns over an ongoing driver shortage and the spreading Delta variant are clouding the outlook for making good on achieving profitable operations this year.

The ride-hail companies’ core businesses are closely tied to broader economic activity and provide insights into the comfort levels of Americans and Europeans in resuming pre-pandemic activities. Uber has been moving to expand into goods and meal delivery to reduce dependence on rides.

During the second quarter, many countries reopened their economies, and analysts expect Uber and Lyft will report revenues rebounded.

But a rapid spread of the more contagious Delta variant has prompted several health authorities to reimpose some restrictions. The U.S. Centers for Disease Control and Prevention sounded alarms on Friday with a report that the Delta variant is as contagious as chicken pox and can be passed on by people who are vaccinated.

“The continued uncertainty around the pandemic’s trajectory will suppress both supply and demand for rideshare services until we see what the Delta variant’s death toll really is,” said Forrester analyst James McQuivey.

The Delta variant complicates efforts by both companies to achieve profitability this year on a basis of adjusted earnings before interest, taxes, depreciation and amortization. The adjustments exclude one-time costs, including stock-based compensation.

Lyft said it would achieve that target by the end of the third quarter, Uber by the end of this year.

Lyft in May said it would take advantage of its leaner cost structure to make more money per ride as passengers return to the platform in greater numbers. Uber, also in May, said it would become profitable in the second half of 2021, requiring the company to quickly reduce losses.

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