Delta Air Lines Projects Clearer Skies Ahead

Delta Air Lines may just be the wind beneath the entire industry’s wings.

In its second-quarter earnings report on Thursday, the Atlanta-based carrier reinstated a full-year profit forecast and cited a notable rebound in travel demand. Its share price, unsurprisingly, took flight following the news — with its industry peers lining up on the runway for takeoff just behind it.

A Turbulent 2025

There were some rough skies for a couple of months there, but Delta seems to think it has now punched through to the other side. Economic uncertainty triggered by the trade war kneecapped US consumer confidence, stifling domestic demand. Meanwhile, a sudden PR problem had foreigners rethinking any potential travel plans to the USA. Then there were incidents including a fatal collision in Washington that sparked fears of widespread air traffic control problems. And did we mention yet that business travel is still down as much as 20% from pre-pandemic levels? 

In April, Delta became the first major airline to flick the seatbelt sign on, pulling its outlook for the year as the stormy clouds of “Liberation Day” announcements rattled financial markets. The rest of the industry soon followed suit — and has paid the price. Through Wednesday, the S&P Supercomposite Airlines Index had fallen 16% year-to-date, compared with the 6.5% ascent of the overall index. 

Now? Delta sees itself pulling out of the tailspin and getting back to cruising altitude — though it still won’t quite be able to make up all the ground it lost:

• Delta reported a $2.1 billion profit in its second quarter, beating analyst expectations and topping its performance in the same quarter a year ago by a full 63%. It also projected better-than-expected results for its next quarter and announced a new earnings outlook for the year of $5.25 to $6.25 a share (better than no guidance, but still down from the $7.35 a pop it projected as the year took off in January).
• The reason for the optimism? Stabilizing demand, specifically among high-income consumers who continue to splurge on international travel and premium tickets. While Delta said main cabin sales fell 5% in the second quarter, premium ticket sales soared 5%.

“Premium has certainly been where our margins have continued to expand, and so we’re highly focused on continuing to provide improved service to those customers and more segmentation,” Delta President Glen Hauenstein said on the company’s earnings call Thursday.

Taking Flight: Shares of Delta closed up 12% on Thursday following the good news. The rest of the industry caught its tailwind: United soared 14%, American climbed 12% and Southwest added about 8%, as did Alaska and JetBlue. Still, some analysts caution against getting too enthusiastic over the news. “Delta’s guidance is encouraging for other full-service carriers, but we would hesitate on overextrapolating the guidance for airlines without premium/diverse revenues,” TD Cowen analyst Tom Fitzgerald wrote in a note Thursday.