Delta Air Lines (DAL), the world’s largest carrier by revenue, reported upbeat second quarter results and reinstated its guidance as growing economic clarity deflects headwinds resulting from the global trade war.
For the quarter, Delta posted adjusted revenue of $15.5 billion, topping estimates of $15.54 billion, per Bloomberg consensus, and up 1% compared to a year ago. Delta’s adjusted earnings per share (EPS) came in at $2.10, versus the $2.07 expected. Operating income came in at $2.0 billion, with an operating margin of 13.2%, down 1.5% from a year ago.
Delta stock soared more than 10% in early trade following the release, which sparked a rally in the airline sector. American Airlines (AAL), Southwest (LUV), and United Airlines (UAL) also popped on Thursday.
Read more about airline stock moves and today’s market action.
The closely watched metric of total revenue per available seat mile (TRASM) came in at $0.1997, down 3% compared to last year.
Last quarter, Delta pulled its full-year guidance due to trade issues and a “murky” outlook, but improving conditions and “confidence” in the business prompted Delta to restore its full-year earnings per share outlook of $5.25 to $6.25, with free cash flow expected at $3 billion to $4 billion. Current quarter projections are for total revenue growth of 0% to 4% year over year, operating margin in the range of 9% to 11%, and EPS of $1.25 to $1.75.
“I think greater clarity is being received, the tax bill being approved, and removing an uncertainty there with the Reconciliation Act was helpful in terms of understanding what the ground rules are,” Delta CEO Ed Bastian said in an interview with Yahoo Finance about reinstating guidance. “Seeing trade deals getting done and progress being made on negotiations is helpful, and understanding where it compared to where we were 90 days ago.”
Bastian added that he also sees demand improving in the second half of the year as consumers and businesses start to “feel a bit more confident” about how much they spend on discretionary travel.
Bastian said that Delta, which focuses on higher-end leisure and business travelers, is in a better spot than budget carriers, which are suffering from an overcapacity problem.
Delta said in its earnings release that premium revenue continued to outpace its economy cabin business by 5% on a year-over-year basis. Loyalty revenue was up 8%, the airline said, driven by co-branded credit card spending growth and card acquisitions. For example, proceeds from its American Express credit card remuneration business hit $2 billion in the quarter, up 10% year over year.
Bastian noted that this year’s summer travel season has been strong, with full flights, and that the airline is having one of the “strongest international seasons” in its history. While the number of foreigners flying Delta has come down as a result of Trump’s trade war, 80% of Delta’s international travel is made up of domestic travelers, meaning Americans are still traveling out of the country despite trade tensions.
Looking at the big picture, Bastian said the industry is going to reward airlines like Delta that have invested in premium services, particularly those that can deliver that experience at the right price.
“That’s been a big change in the industry that is 100 years old,” Bastian said about the growing trend of premium services.
“The carriers that have invested heavily in reliability, products, service offerings are the ones that are able to price for it, and [they] give consumers the value and experience they want,” Bastian said.
Pras Subramanian is the lead auto reporter for Yahoo Finance. You can follow him on X and on Instagram.
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