Delta Climbs Further Upmarket

At an investor day in Atlanta, the airline outlined plans to attract more premium customers. It also touched on demand trends, no-show rates, the corporate recovery, and some issues in New York.

Dear readers,

You cannot accuse the Delta Air Lines management team of a lack of confidence. Senior management convened an investor day in Atlanta on Tuesday, and the word I will use to describe the tone is “giddy.” Executives are optimistic — not only about this year, but for several more. They’re no longer waiting for a corporate travel recovery, they say: instead they’re capitalizing on what they see now: a leisure-oriented customer base that’s willing to pay more for a better experience.

The current quarter, which ends Friday, will be the best second quarter in Delta’s history, CEO Ed Bastian said. It may improve from there. Delta said its operating margin could reach 12 percent for the second half of this year. If that happens, that would put Delta at the top end of earlier guidance, with earnings per share near $6 and free cash flow as high as $3 billion. Next year, Delta is targeting an operating margin of 13 to 15 percent, with earnings per share better than $7 and free cash flow of more than $4 billion.

This is not an investing newsletter. I followed Delta's event to try to pick out the most relevant topics for you on a slew of commercial topics. Below, you’ll learn why Delta is underperforming in New York, why it may have misinterpreted no-show rates from earlier this year, how it views the corporate travel recovery, and what the airline’s president thinks about American's spat with travel agents. I have also summarized information about Delta's SkyMiles strategy, including those lucrative credit cards, and how Delta seeks to monetize WiFi and personalize content on in-seat screens. Also: Delta shared its new goal for annual revenue from its American Express deal, and it’s huge.

Here are the highlights: