Delta lifts profit forecast thanks to strong demand and premium tickets

Delta Airlines The company on Tuesday raised its second-quarter forecast to see full-year adjusted earnings per share of $6, up from an April forecast last year, as strong travel demand and upgrades to more expensive fare categories continued to drive growth. upper limit.

Delta expects adjusted earnings per share of $2.25 to $2.50 for the second quarter, up from its previous range of $2 to $2.25 per share. Chief Executive Ed Bastian said the company’s second-quarter earnings, due to be reported next month, are likely to be the highest for the April-June period.

“As you know, anyone who’s traveled knows, that demand has gone off the chain,” Bastian said in an interview on CNBC’s “Squawk Box.”

Delta Air Lines shares rose 6.8 percent to $46.09 on Tuesday, a more than two-year high.

During its investor day presentation on Tuesday, the airline also raised its forecast for free cash generation to $3 billion this year from $2 billion. Delta Air Lines reinstated its quarterly dividend earlier this month.

Delta and its rivals reported strong demand for travel, especially international travel, while other industries struggled as consumers grapple with inflation and other challenges. The industry is also facing growth constraints due to a shortage of air traffic controllers, delays to new planes and a shortage of new pilots, keeping fares firm.

But in addition to strong demand, airlines are enjoying jet fuel prices that are about 30% lower than a year ago.

And, Delta forecast Tuesday that revenue per available seat mile, a measure of how often an airline flies its revenue, will rise 18% from last year, up from a previous forecast of 15% to 15%. 17% growth.

The airline has repeatedly touted customers’ willingness to pay for more expensive seats, from those with extra legroom to first class. Premium income will reach about $19 billion this year, accounting for 35% of total revenue, up from 24% in 2014.

The airline also said its lucrative partnership with American Express credit cards continues to grow and is expected to generate $6.5 billion in revenue this year, compared with $4 billion in 2019.