Delta sees big profit on strong premium travel demand, rates improve Reuters
Written by Rajesh Kumar Singh and Shivansh Tiwary
CHICAGO (Reuters) – Delta Air Lines forecast on Friday that 2025 profits will beat Wall Street expectations due to strong demand for premium travel and improved pricing power, and its share price jumped.
It also reported higher-than-expected profit for the fourth quarter and forecast stronger earnings for the current quarter.
Delta shares hit a record high and rose nearly 11% in mid-day trading. Shares of rivals United Airlines and American Airlines (NASDAQ: ) were up about 5% and 3%, respectively.
Demand for premium travel has been on the rise since the pandemic, as travelers are willing to pay premium fares for comfortable and comfortable seats. Delta, which has positioned itself as the nation’s leading airline, has been among the biggest beneficiaries.
US carrier premium ticket revenue has been growing faster than main cabin ticket revenue and is expected to overtake it by 2027. In the December quarter, premium income growth outpaced the main cabin by 6 percent.
A major reduction in airline seats in the domestic market, which plagued carriers last summer, has pushed up ticket prices and strengthened the industry’s earnings outlook.
The trend helped Delta post higher unit revenue, a proxy for pricing power, in the December quarter, despite a drop in travel costs during the US presidential election in November.
“Across the industry, carriers are taking steps to improve their financial health, making the backdrop increasingly positive,” CEO Ed Bastian told analysts on an earnings call.
Air fares rose at the fastest pace in 20 months in November after limited availability of seats. This has provided a good backdrop for the industry’s earnings, with analysts at JP Morgan calling it a “new golden age” for US airlines.
High ticket prices, however, increase the risk of damaging the desire to travel. Delta downplayed those concerns, saying fares weren’t too high to dampen consumer demand.
A strong US dollar is also helping the industry as it has made overseas travel more affordable for American travelers. Delta said it expects the transatlantic market to generate record profits this year.
“The US consumer is financially healthy and continues to prioritize experiential spending,” Bastian said.
Delta said the Los Angeles wildfires led to a drop in sales, but it is not expected to have a significant impact on earnings.
The company expects earnings of more than $7.35 a share this year, the highest in its 100-year history, compared with analysts’ expectations of $7.22 per share, according to LSEG data. The company reported adjusted earnings of $6.16 per share in 2024.
Citi analyst Stephen The Trent (NS:) called the carrier’s vision for 2025 “very encouraging.”
Delta forecasts adjusted earnings in the range between 70 cents and $1 a share for the quarter through March, compared with analysts’ expectations of 77 cents per share, according to data compiled by LSEG.
It reported adjusted earnings of $1.85 per share for the December quarter, beating the $1.75 analysts estimated.
