Delta Air Lines Drives Airline Sector Rally With 1% Revenue Growth

Delta Air Lines, the world’s largest carrier by revenue, reported robust second-quarter results, driving a significant rally in the airline sector. The company's adjusted revenue for the quarter was $15.5 billion, slightly below the estimated $15.54 billion, but still up 1% compared to the previous year. Delta’s adjusted earnings per share (EPS) came in at $2.10, surpassing the expected $2.07. Operating income stood at $2.0 billion, with an operating margin of 13.2%, a 1.5% decrease from the previous year.

The closely watched metric of total revenue per available seat mile (TRASM) was $0.1997, down 3% compared to the previous year. Despite this, Delta reinstated 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 include total revenue growth of 0% to 4% year over year, an operating margin in the range of 9% to 11%, and EPS of $1.25 to $1.75.

Delta CEO Ed Bastian attributed the reinstatement of guidance to greater economic clarity, including the approval of the tax bill and progress in trade negotiations. He also noted improving demand in the second half of the year as consumers and businesses gain confidence in discretionary travel spending. Bastian emphasized that Delta, focusing on higher-end leisure and business travelers, is better positioned than budget carriers facing overcapacity issues.

Premium revenue continued to outpace the economy cabin business by 5% on a year-over-year basis. Loyalty revenue increased by 8%, driven by co-branded credit card spending growth and card acquisitions. Proceeds from Delta's American Express credit card remuneration business hit $2 billion in the quarter, up 10% year over year.

Delta’s encouraging report boosted the entire airline sector. United jumped 10.1%, American climbed 7.9% and JetBlue rose 4.8%. The market responded positively to Delta's reinstated guidance and optimistic projections, reflecting a broader confidence in the airline industry's recovery and growth prospects.

Delta and other major U.S. carriers had pulled or slashed their forecasts in the spring, citing macroeconomic uncertainty amid President Donald Trump’s tariff rollouts which had consumers feeling uneasy about spending on travel. However, Delta’s positive outlook and strong earnings report sparked a rally in the airline sector, with American Airlines, Southwest, and United Airlines also experiencing significant gains.