Delta Air Lines, the leading airline globally by revenue, has announced positive financial results for the second quarter, reinforcing its guidance amidst a backdrop of increasing economic stability that mitigates the obstacles posed by the global trade war.
For the quarter, Delta reported adjusted revenue of $15.5 billion, slightly exceeding Bloomberg consensus estimates of $15.54 billion and representing a 1% increase year-over-year. The airline recorded adjusted earnings per share (EPS) of $2.10, again surpassing expectations of $2.07. Operating income reached $2 billion with an operating margin of 13.2%, which has declined by 1.5% compared to the previous year.
Following this announcement, Delta’s stock rose over 12% in premarket trading, reflecting market optimism.
The total revenue per available seat mile (TRASM), a critical performance indicator, was measured at $0.1997, reflecting a 3% decrease from the previous year. However, the airline has reinstated its full-year guidance after previously withdrawing it due to trade uncertainties. The new EPS outlook is set between $5.25 to $6.26, supported by expected free cash flow of $3 billion to $4 billion. For the upcoming quarter, Delta anticipates total revenue growth of 0% to 4%, an operating margin of 9% to 11%, and EPS between $1.25 to $1.75.
CEO Ed Bastian shared insights with Yahoo Finance, noting that the recent clarity regarding tax legislation and trade negotiations has contributed positively to the airline’s outlook. He believes that as consumer confidence improves, there will be a corresponding increase in discretionary travel spending.
Notably, Delta’s focus on premium leisure and business travelers positions it favorably compared to budget carriers, which are currently facing challenges related to excess capacity. The airline indicated that premium revenue is growing at 5% year-over-year, surpassing the performance of its economy cabin. Additionally, loyalty revenue increased by 8%, thanks in part to growth in co-branded credit card spending, with earnings from its American Express partnership reaching $2 billion, a 10% yearly increase.
Bastian highlighted the strong demand during this year’s summer travel season, with full flights and a record international travel period even amidst trade tensions, as the majority of Delta’s international travelers are American citizens.
This positive outlook not only reflects Delta’s robust performance but also indicates a broader recovery trend in the travel industry, suggesting that confidence is slowly returning to both consumers and businesses in the wake of challenging economic conditions.