Delta's Q4 2025 Earnings Call: Contradictions Emerge on Booking Curve, Corporate Demand Sources, and Main Cabin Recovery

Date of Call: Jan 13, 2026

Financials Results

• Revenue: $14.6 billion for Q4, 1.2% higher than in 2024, with $58.3 billion for full year 2025, up 2.3% year-over-year.
• EPS: $1.55 per share for Q4; $5.82 per share for full year 2025.
• Operating Margin: 10% for full year 2025; 10% for Q4, maintained a double-digit operating margin.

Guidance:

• Revenue growth of 5% to 7% year-over-year in the March quarter.
• EPS of $6.50 to $7.50 for full year 2026, representing 20% year-over-year growth at the midpoint.
• Free cash flow of $3 billion to $4 billion for 2026.
• Leverage target of 2x by year-end 2026.
• Nonfuel CASM growth expected to be modestly above full year average in Q1 2026.
• Q1 2026 EPS expected to be $0.50 to $0.90, with operating margin of 4.5% to 6%.
• Capacity growth of 3% for full year 2026, with all new seat growth concentrated in premium cabins.

Business Commentary:

Financial Performance and Revenue Growth:

• Delta Air Lines reported record revenue of $58.3 billion for the full year 2025, with a 10% operating margin and $5.82 earnings per share.
• The growth was driven by strong consumer and corporate demand, a robust performance in premium revenue, and diversified revenue streams now representing 60% of total revenue.

Free Cash Flow and Leverage Reduction:

• The company delivered a record free cash flow of $4.6 billion, reducing leverage by more than 50% and ending the year with a gross leverage ratio of 2.4x.
• This was achieved through disciplined execution, cost management, and strong cash generation, allowing Delta to strengthen its balance sheet.

International Expansion and Fleet Renewal:

• Delta plans to grow its international footprint with an order for 30 Boeing 787-10s, enhancing its wide-body fleet and supporting profitable growth.
• The expansion is part of Delta's strategy to leverage best-in-class joint ventures and invest in fleet renewal for improved international network capabilities.

Loyalty Program and Co-brand Partnerships:

• American Express remuneration grew 11% to $8.2 billion, driven by more than 1 million new card acquisitions and double-digit spend growth.
• This reflects the power of Delta's loyalty ecosystem and the success of its integrated commercial and customer strategies.

Operational Reliability and Customer Experience:

• Delta was recognized as the most on-time airline in North America by Cirium, maintaining a strong Net Promoter Score among major airlines.
• The focus on reliability and customer experience is supported by continuous improvements in operational performance and employee training.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted 'strong close to our Centennial year,' 'record revenue,' 'double-digit operating margin,' 'highest in Delta's history' free cash flow of $4.6 billion, and 'optimism for Delta's future has never been brighter.' Outlook expects revenue growth of 5% to 7% in March quarter and 20% EPS growth in 2026.

Q&A:

• Question from Jamie Baker (JPMorgan): Concerns about potential 10% rate cap and impact on Delta's loyalty and premium positioning.
  Response: Management stated it's too early to speculate, but Delta's premium card would be more valuable if such a cap were implemented, though it would restrict lower-end consumer credit access.

• Question from Michael Linenberg (Deutsche Bank): Inquiry about demand acceleration from Q4 into March quarter and if lower fare structure is moving up.
  Response: Revenue has accelerated across all geographies, with booking curve returning to normal levels; Main Cabin hasn't moved yet, but higher-end guide would require its movement.

• Question from John Godyn (Citi Research): Questions on corporate demand trends and if they are due to broader environment or market share gains.
  Response: Corporate demand is driven by a broader market and Delta's all-time high market share, but the improvement is industry-wide, supported by optimistic corporate travel plans.

• Question from Conor Cunningham (Melius Research): Asks about Joe Esposito's priorities as new Chief Commercial Officer and strategy changes.
  Response: Strategy remains consistent; focus is on deeper integration of commercial initiatives, product deployment, and leveraging new fleet and partnerships for further growth.

• Question from Ravi Shanker (Morgan Stanley): Asks about sustainability of current demand strength and rationale for new 787 aircraft order.
  Response: Strength is supported by stabilization of core demand after choppy 2025; 787 order enhances fleet diversity, margin, and efficiency, replacing older 767s.

• Question from Savanthi Syth (Raymond James): Asks about operational reliability and recovery post-COVID and relative performance to competitors.
  Response: Reliability is strong (named most on-time airline), but recovery from irregular operations needs improvement; Delta maintains industry leadership but aims for a healthier industry overall.

• Question from Duane Pfennigwerth (Evercore ISI): Asks about biggest surprises in industry and Delta's evolution since early career.
  Response: Mission to restore Delta to top of U.S. aviation industry is accomplished; future requires continued boldness and long-term vision.

• Question from Christian Wetherbee (Wells Fargo): Asks about normalization of premium vs. main cabin revenue spread and risks to downside of guidance.
  Response: Premium margins are high; Main Cabin upside remains as industry commodities struggle. Risks include unexpected policy changes and economic volatility, but current environment is bullish.

• Question from Andrew Didora (Bank of America): Asks about drivers of free cash flow and step-up in CapEx.
  Response: Free cash flow driven by overall margins, with loyalty premium having outsized impact; CapEx expected to remain disciplined around $5 billion range, with focus on debt reduction and shareholder returns.

• Question from David Vernon (Bernstein): Asks if Delta's accelerating revenue while Main Cabin isn't indicates a differentiated path and easier glide given industry mix.
  Response: Delta has charted a different path with revenue diversification and premium focus; industry commodity side is struggling, leading to rationalization, which creates upside for Delta.

• Question from Michael Goldie (BMO Capital Markets): Asks about longer-term outlook for non-Main Cabin revenue mix and potential for further industry consolidation.
  Response: Non-Main Cabin revenue is reacting to customer behavior; industry will see further rationalization as unprofitable carriers face duress, leading to consolidation or restructuring.

• Question from Catherine O'Brien (Goldman Sachs): Asks about sequential trends across geographies in Q1 and capital allocation priorities for shareholder returns.
  Response: Both domestic and international trends are positive, with international offering margin upside. Shareholder returns will expand as leverage decreases, with priority on debt reduction currently.

• Question from Thomas Fitzgerald (Cowen): Asks about next steps for revenue segmentation and technology opportunities in 2026.
  Response: Will roll out tiered product offerings (basic, main, extra) across Comfort+ and other services in 2026, enhancing merchandising and customer choice.

Contradiction Point 1

Booking Curve Normalcy and Demand Outlook

It involves differing assessments of current demand trends, which are critical for forecasting future performance and investor expectations.

Has the lower fare tier increased, and has the booking curve normalized with accelerated demand from Q4 to March? - Michael Linenberg (Deutsche Bank)

20260113-2025 Q4: The booking curve has returned to a more normal level... current trends are better than October. - [Glen W. Hauenstein](CEO)

Is the March 2025 booking curve following a normal pattern? Could you provide additional details? - Michael Linenberg (Deutsche Bank)

2025Q3: Our booking curve is very, very different from the typical pattern we've seen... it's not a normal booking curve. - [Glen W. Hauenstein](CEO)

Contradiction Point 2

Source of Strong Corporate Demand

It reflects differing attributions for strong corporate demand, impacting perceptions of Delta's competitive positioning and market share dynamics.

Is the early-year corporate demand surge driven by broader market trends or Delta’s market share gains? - John Godyn (Citi Research)

20260113-2025 Q4: It is a broader market trend with Delta’s market share at all-time highs. - [Glen W. Hauenstein](CEO)

Is the current corporate demand specific to Delta or a broader market trend? - John Godyn (Citi Research)

2025Q3: I do think that Delta is gaining market share and that we are taking share away from competitors. - [Glen W. Hauenstein](CEO)

Contradiction Point 3

Timeline for Main Cabin Revenue Recovery

It involves conflicting signals on when Main Cabin revenue will return to positive growth, which is vital for understanding the company's financial recovery trajectory.

Are current trends enough to achieve the 2026 EPS guidance's high end, or must they accelerate more? - John Godyn (Citi Research)

20260113-2025 Q4: The higher end of the guide would require Main Cabin to start moving, which hasn’t happened yet but is expected in 2026. - [Glen W. Hauenstein](CEO)

Will Main Cabin revenue increase in 2025, and when do you expect this growth? - Michael Goldie (BMO Capital Markets)

2025Q3: We don't expect Main Cabin revenue to increase materially in 2025... we think that 2026 is the year that Main Cabin revenue will increase. - [Glen W. Hauenstein](CEO)

Contradiction Point 4

Assessment of Industry Capacity and Competitive Environment

It reflects a shift from acknowledging broad-based industry rationalization to implying Delta's differentiated strength is unique, affecting competitive strategy perceptions.

How does Delta's accelerating Main Cabin revenue amid a mixed industry outlook affect its competitive capacity? - David Vernon (Bernstein)

20260113-2025 Q4: The commoditized sector is rationalizing, and eventually, Main Cabin will return. Competitive capacity is in a good place. - [Glen W. Hauenstein](CEO) & [Joe Esposito](CCO)

How much of the second-half unit revenue guidance is based on controllable factors versus industry peer capacity actions? - David Vernon (Sanford C. Bernstein & Co., LLC.)

2025Q2: It's a combination of both. Delta controls its own capacity... Open seat data and competitor statements suggest more adjustments are expected in the back half of the year. - [Glen William Hauenstein](CEO)

Contradiction Point 5

Expectations for Premium Cabin Demand and Revenue Spread

It involves a transition from expecting continued premium demand expansion to stating spreads are at a "historic high" and awaiting Main Cabin recovery, impacting revenue strategy outlook.

What is the expected normalization of premium vs. Main Cabin revenue spread in 2026, and is the current wide spread sustainable? - Christian Wetherbee (Wells Fargo)

20260113-2025 Q4: Margin spreads are at a historic high. ... The commodity sector (Main Cabin) has struggled for years... Eventually, the industry must rebalance by growing Main Cabin revenue. - [Glen W. Hauenstein](CEO)

Did premium trends meet expectations given the 10-point spread between premium growth and main cabin contraction, and should we expect at least another quarter of expansion? - Jamie Baker (JPMorgan Chase & Co.)

2025Q2: There is no indication of diminishing demand for premium cabins. The company is adding more premium product... Forward bookings continue to support strong premium demand. - [Glen William Hauenstein](CEO)