(Bloomberg) -- Delta Air Lines Inc. jumped the most in more than four years after reaping the benefits of robust demand for its lucrative premium seats, a trend the airline said shows no sign of retreat.
“The supply-demand balance is as good as I can ever recall it being as we look into 2025,” Chief Executive Officer Ed Bastian said in an interview after the company reported earnings that beat analysts’ estimates. “We have pretty good visibility through the first quarter and into the spring.”
The upbeat outlook from Delta, the first major US carrier to release results, buoyed investors’ optimism about the rest of the sector and drove up shares in rivals United Airlines Holdings Inc. and American Airlines Group Inc. Delta surged as much 12%, the biggest intraday gain since November 2020, while United advanced as much as 6.9% and American rose as much as 4.8%.
Delta’s results reflect an upturn in fares after airlines slowed expansion in the domestic market, and healthy demand for international flights even during the winter. The carrier plans to continue its aggressive investment in premium products and services, in part to appeal to millennials who the company says are spending more on air travel than all other generations.
About 85% of the seats the carrier plans to add in 2025 will be premium spots.
Adjusted profit will be 70 cents to $1 a share this quarter, the airline said in a statement Friday that also included fourth-quarter 2024 financial results. That compares with a 76-cent average from analyst estimates compiled by Bloomberg. Revenue will increase as much as 9% from a year ago, the carrier said, while analysts expected a 5.75% jump.
While fares dipped in January as usual from 2024’s fourth quarter, domestic ticket prices have been about 12% higher than the same month a year ago, according to booking app Hopper Inc. US fares are expected to remain above 2023 and 2024 levels at least through mid-year, Hopper said.
Although Bastian is optimistic about the 2025 outlook, airlines forecasts have proven short-lived before. Delta started 2024 warning about the impact of inflation on costs, then turned upbeat in April before warning of overcapacity as the summer tourist season got under way. Since November, the CEO has been betting that flyers will fork out extra cash for premium seats.
Delta has predicted that sales from premium seats will exceed economy tickets by the end of 2027, as the carrier seeks to push more travelers into the front of the cabin. Following the pandemic, more leisure travelers upgraded to premium economy and business-class seats, offering some respite to airlines as corporate passengers cut back.
At the same time, the airline will keep offering some cut-rate basic economy fares to lure travelers away from deep-discounters, highlighting how it’s seeking to stay in control of both ends of the travel experience.
Bastian said the corporate market is showing signs of coming back, pointing to a 10% jump in travel sales in that segment that was led by technology and financial services companies.
“We saw a healthy bounce particularly with corporate spending post the election, once there was clarity to the outcome,” he said of the November presidential vote.
Delta’s fourth-quarter adjusted profit was $1.85 a share, compared with the average $1.76 from analyst estimates. Revenue was $14.44 billion, while Wall Street expected $14.16 billion. Full-year adjusted earnings will be “greater than” $7.35 a share, compared with an average $7.45 from analysts’ estimates, the airline said.
Revenue from international travel increased 6% year over year, while premium revenue rose 6 percentage points more than that from the coach cabin. Payments from credit card partner American Express Co. for loyalty points climbed 14% to nearly $2 billion.
The carrier also said it would split $1.4 billion in profit sharing among employees next month.
--With assistance from Anthony Palazzo.
(Updates with share trading in third paragraph.)
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