Delta Air Lines (DAL) delivered robust fourth-quarter results, exceeding analyst expectations and highlighting strong demand dynamics as it closed out 2024. The airline reported adjusted earnings per share (EPS) of $1.85, surpassing the consensus estimate of $1.76 and significantly improving from $1.28 in the prior year. Revenue rose by 5.7% year-over-year to $14.44 billion, beating expectations of $14.16 billion, driven by strength in passenger and cargo revenue. Passenger revenue increased by 5.3% year-over-year to $12.82 billion, while cargo revenue surged 32% to $249 million, surpassing the $204.3 million consensus estimate. Key metrics such as available seat miles (ASM) and revenue passenger miles (RPM) also showed healthy year-over-year growth of 5.2% and 4.7%, respectively.

Delta's premium offerings remained a standout contributor, with premium ticket revenue rising 8%, significantly outpacing the 2% growth in main cabin revenue. CEO Ed Bastian emphasized the increasing consumer preference for premium products, reinforcing Delta’s strategy to expand its premium seating offerings. This shift has been instrumental in bolstering margins, with premium revenue outperforming main cabin by six percentage points in the quarter. Delta also saw sequential improvements in unit revenue across its geographic entities, including a notable 6% growth in transatlantic revenue, reflecting strong demand for international travel. Managed corporate sales grew by 10% year-over-year, driven by strength in the technology and financial services sectors, underscoring robust business travel recovery.

Guidance and Outlook

Delta’s outlook for the first quarter of 2025 suggests continued strength. The company projects adjusted EPS between $0.70 and $1.00, with the midpoint higher than the consensus estimate of $0.76 at the midpoint. Revenue growth is expected to range between 7% and 9%, exceeding analysts’ expectations of 5.8%. Delta anticipates an adjusted operating margin of 6%-8%, a marked improvement from the prior year. For the full year 2025, Delta forecasts EPS exceeding $7.35, reflecting more than 10% growth from a normalized 2024 baseline. The company also projects over $4 billion in free cash flow and gross leverage below 2x by year-end, highlighting its strong financial position.

Delta’s longer-term framework aims for 10% average annual EPS growth, driven by mid-teens operating margins and a diversified revenue base. In 2024, premium and loyalty contributions accounted for 57% of total revenue, showcasing the strategic value of these high-margin streams. Additionally, American Express remuneration grew by 14% year-over-year, supported by strong cardholder spending and new acquisitions. The airline’s focus on international markets, particularly the transatlantic region, continues to yield positive results, with international passenger revenue rising 6% in the quarter.

Key Drivers and Market Trends

Delta’s results reflect broader patterns in the travel industry, including strong leisure and corporate travel demand. The company noted an acceleration in demand throughout the quarter, achieving four of the top ten revenue days in its history during November and December. Adjusted total unit revenue (TRASM) improved sequentially, rising 0.4% year-over-year despite the expected one-point drag from the November elections. The airline's diversified revenue streams, operational excellence, and strategic focus on premium products position it well to navigate challenges such as rising non-fuel costs, which increased 5.7% year-over-year in Q4.

The airline industry has faced headwinds from elevated wages for pilots, flight attendants, and mechanics, but Delta’s strong performance and positive guidance underscore its ability to manage these challenges. Looking ahead, Delta’s focus on premium offerings, international expansion, and corporate travel recovery should continue to support revenue and margin growth, providing a strong foundation for what the company projects will be its best financial year in its 100-year history. With momentum carrying into 2025, Delta remains well-positioned to capitalize on favorable industry dynamics and deliver on its ambitious financial targets.