Delta Air Lines Raises Profit Forecast on Strong Demand and Increased Premium Ticket Sales

Delta Air Lines has raised its profit forecast due to strong demand and increased sales of premium tickets. The airline expects its full-year adjusted earnings to be at the high end of the previously stated range. Additionally, Delta has raised its estimate for free cash generation this year. The company’s investor day is scheduled for Tuesday, and it will report its second-quarter results next month.

Delta Air Lines projects adjusted earnings per share of $2.25 to $2.50 for the second quarter, up from the previous range of $2 to $2.25. CEO Ed Bastian mentioned that the company’s second-quarter earnings could potentially be the highest ever for the April-June period, highlighting the robust demand in the travel industry. Delta shares experienced a 6.8% increase, reaching a more than two-year high of $46.09.

During the investor day presentation, Delta also revised its estimate for free cash generation this year to $3 billion from $2 billion. The airline recently reinstated its quarterly dividend. Delta, along with other airlines, has witnessed strong travel demand, particularly for international flights, while facing challenges in other sectors due to factors like inflation. The airline industry has also experienced growth constraints caused by shortages of air traffic controllers, delays in new aircraft, and a shortage of pilots, resulting in stable fares.

In addition to the resilient demand, airlines are benefiting from lower jet fuel prices compared to last year. Delta forecasts an increase in revenue per available seat mile by as much as 18% compared to the previous year, surpassing the previous forecast of 15% to 17% growth.

Delta has emphasized customers’ willingness to purchase more expensive seats, including those with extra legroom and first-class seats. Premium revenue is expected to reach approximately $19 billion this year, accounting for a 35% share of total revenue, compared to a 24% share in 2014. The airline’s partnership with American Express credit cards is also thriving, generating an estimated $6.5 billion in 2023, compared to $4 billion in 2019.