ii view: Delta Air confidence returns as bookings stabilise

Second-quarter results to 30 June  

• Revenue up 1% at $15.51 billion
• Adjusted earnings down 11% to $2.10 per share
• Adjusted net debt down 13% to $16.32 billion
• Dividend of 15 US cents per share, unchanged from the previous quarter

Guidance: 

• Expects third quarter revenues to be flat to up 4%
• Reaffirming a previous forecast for full year adjusted earnings of $5.25-to-$6.25 per share, potentially down from 2024’s  
• Targeting a 25% increase in the third dividend payment 

Chair Glen Hauenstein said:

“Through the quarter, demand trends stabilized at levels that are flat to last year and we continued to see resilience in our diverse, high-margin revenue streams.”

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ii round-up:

Delta Air Lines Inc (NYSE:DAL) today reinstated a forecast for full year earnings as bookings stabilised following the announcement of proposed US trade tariffs by Donald Trump in April. 

Delta now expects full year 2025 adjusted earnings per share of between $5.25-to-$6.25 per share, down from an estimate of $7.35 per share given in January. However, this in contrast to no estimate given back at the company’s April first quarter results. 

Shares for the S&P 500 company soared 12% in early US trading having come into these latest results down around 16% so far in 2025. The S&P 500 has gained 6% year-to-date. Shares for nearly all domestic US flight operator Southwest Airlines Co (NYSE:LUV) are up 3% during 2025.

Delta flies to more than 290 destinations across six continents. Revenues for the quarter to late June rose 1% to $15.51 billion, aided by demand for premium revenues such as business class flights. 

A one-tenth fall in the operating profit margin to 13.2% drove a similar fall in adjusted earnings to $2.10 per share. Non-fuel related costs rose 7% from a year ago to $10.48 billion. Both revenues and earnings for this latest quarter beat Wall Street hopes.

Delta expects third-quarter revenues to gain by up to 4%, pushing earnings of between $1.25-to-$1.75 per share. Analysts had been forecasting an outcome of around $1.30 per share.

Group adjusted net debt fell 13% from a year ago to $16.32 billion with the airline still expecting to repay at least $3 billion of debt during 2025 as it continued to strengthen the balance sheet following the pandemic.

A quarterly dividend of 15 US cents per share is unchanged from the prior quarter although with management targeting a 25% improvement in the payment come the third quarter numbers. 

Next quarter results are likely to be announced early to mid-October.  

ii view:

Delta served more than 200 million customers in 2024. Headquartered in Atlanta, Georgia, the airline operates across nine US hubs, flying up to 5,000 peak-day flights. Domestic US flights generated its biggest slug of revenue during 2024 at 70%. That was followed by Atlantic flights at 17%, flights to Latin America at 7% and those to the Pacific region the balance of 5%.  

For investors, the tough outlook for US consumers including elevated interest rates and job cuts for US government departments cannot be overlooked. Geopolitics tensions overhang with tensions between the US, Russia and China persisting. Airline industry emissions and climate change considerations also warrant consideration, while uncertainty regarding US trade tariffs, although eased, is far from put to bed. 

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More favourably, the price of oil is down around 7% during 2025 with Delta fuel costs for this latest quarter down 11% year-over-year. Diversity of revenue types and geographical locations exists. A firm recovery in passenger numbers from the pandemic has upped cashflows allowing a reduction of net debt and a planned increase in the dividend, while Delta’s fleet is being pushed towards more fuel efficient and climate friendly aircraft.  

In all, and while the many risks outside of management’s control such as the weather raise risks across the transport sector, exposure to the major US economy is likely to leave at least existing holders staying onboard this major US airline. 

Positives: 

• Diversity of geographical locations
• High focus on costs

Negatives:

• Heightened geopolitical tensions 
• Many factors outside of management control

The average rating of stock market analysts:

Buy