The Stock of Delta Jumps, as Record Revenues Are Driven by Accelerating Business Travel Demand

Delta Air Lines Inc. has announced record-breaking first-quarter revenue driven by a surge in demand for business travel. However, despite this positive news, the airline's stock took a downturn amidst a broader market decline.

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The company revealed that the strong demand experienced in the first quarter has persisted into the current quarter, indicating the likelihood of another revenue record.

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CEO Ed Bastian emphasized Delta's outstanding operational reliability, boasting the airline's leading performance in completion factor and punctuality, with 26 days free from cancellations during the quarter.

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Initially, Delta's stock rose by as much as 4.1% following the opening bell, but later reversed its gains to trade lower. In afternoon trading, the stock was down 0.5%, albeit outperforming both the S&P 500 Index, which declined by 1.4% due to disappointing consumer inflation data, and its industry peers, as evidenced by the 1.5% drop in the U.S. Global Jets ETF.

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Delta attributed its sustained growth to several factors including the introduction of modern aircraft, enhanced premium cabin services, and the expansion of free Wi-Fi offerings, all of which have contributed to increased travel demand.

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Bastian highlighted that Delta's core consumers remain in a favorable position, with travel continuing to be a top priority for them. Additionally, he noted that shifting consumer preferences and generational changes are fueling ongoing growth in premium travel experiences, while business travel demand has shown significant improvement this year.

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For the quarter ending March 31, Delta reported a net income of $37 million, or 6 cents per share, a reversal from the net loss of $363 million, or 57 cents per share, during the same period last year. Adjusted earnings per share, excluding one-time items, surged from 25 cents to 45 cents, surpassing the FactSet consensus of 36 cents.

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Revenue climbed by 7.8% to $13.75 billion, well above the FactSet estimate of $12.52 billion, with passenger revenue reaching $11.13 billion, up 6.9%.

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Managed corporate sales grew by 14% year-over-year, driven by the return of large corporate accounts, particularly in the technology, consumer services, and financial sectors. Recent corporate surveys indicate a positive outlook, with 90% of companies expecting travel volumes to either increase or remain stable in the June quarter and beyond.

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Delta's load factor improved to 83% from 81%, surpassing expectations, while traffic rose by 9% to 54.21 billion revenue passenger miles and capacity increased by 7% to 65.54 billion available seat miles.

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Looking ahead, Delta anticipates second-quarter revenue growth of 5% to 7%, slightly above the FactSet consensus, and adjusted EPS in the range of $2.20 to $2.50, aligning with analysts' expectations. For the full year 2024, Delta reiterated its EPS guidance of $6 to $7 and its free-cash-flow forecast of $3 billion to $4 billion.

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Despite fluctuations in its stock price, Delta has achieved a year-to-date increase of 17.1%, outperforming both the U.S. Global Jets ETF and the S&P 500.

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