Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Delta Air Lines restored its financial guidance for the full year and set a rosy outlook for the next three months after demand trends “stabilised”, sending the group’s shares more than 12 per cent higher in pre-market trading.
One of the US’s big three commercial airlines, Delta said revenues were resilient in the three months ended June 30, helping it deliver results in line with previous guidance and underpinning a decision to boost its current quarter dividend by 25 per cent.
Thursday’s results cover a period of significant political and economic uncertainty, including Donald Trump’s trade war, concerns about the US economic outlook, and conflict between Israel and Iran that sent oil prices to a five-month high.
Delta in January said it expected record annual profits this year thanks to passengers’ continued willingness to pay for premium seats, but in March the carrier slashed its first-quarter guidance as economic uncertainty cut into corporate and consumer spending.
A week after Trump launched his “liberation day” tariff blitz in April, Delta said it would be premature to provide an updated full-year outlook given the “lack of economic clarity”.
Since April, “demand trends stabilised . . . and we continued to see resilience in our diverse, high-margin revenue streams”, Delta president Glen Hauenstein said. Revenue trends were expected to improve in the second half of the year as the industry, broadly, cuts flights, he added.
The company said the corporate demand environment was “steady” in the June quarter. Its international segment performed well, with “strong demand” for transatlantic travel pushing revenue from flights to European destinations up 2 per cent from last year’s record level.
But in a continued sign of the diverging fortunes of wealthy and less wealthy travellers, growth in Delta’s premium tickets continued to outpace its main cabin. The dollar value of last quarter’s decline in main cabin revenue, however, was more than offset by increases in the company’s premium sales and loyalty revenue from co-branded credit card spending growth and card acquisitions.
Delta on Thursday said it expected adjusted earnings of $5.25 to $6.25 a share in its fiscal year, with chief executive Ed Bastian hailing the decision to restore full-year financial guidance as a reflection of “our confidence in the business”. The range implies a midpoint higher than the median forecast among analysts of $5.39.
Delta’s net income jumped 63 per cent from a year ago to $2.1bn in the three months to the end of June, while operating revenue was about flat at $16.6bn.
For the current quarter, Delta forecast revenue to rise between zero and 4 per cent compared to a year ago and adjusted earnings of $1.25 to $1.75 a share. The midpoints of those ranges are above what Wall Street expects.