Delta Keeps Rolling
We questioned the airline's "durable and differentiated" slogan from its November 2024 investor day. It sounded boring. But its earnings suggest that’s exactly what the airline is.
Dear readers,
I know many of you read my earnings call summaries for the shots I take at executives who share overly rosy predictions and then fail to hit them.1 I just want to say up front that I can’t deliver on that today because Delta is a very well-run company that consistently meets its key financial targets, including during a very choppy 2025. (However, if you did come for a bit of snark… right before I published this newsletter, I learned a piece of internal United Airlines news that will satisfy you, as Andrew Nocella made a *very* interesting temporary hire. Read to end of this newsletter for that.)
On Tuesday, Delta reported earnings that should (again) lead the U.S. industry: full-year 2025 pre-tax income of $6.2 billion, with a pre-tax margin of 9.8 percent. Its free cash flow2 — which Wall Streeters sometimes argue is a better metric than net income — reached a record $4.6 billion.
For the fourth quarter — traditionally not a strong period for U.S. airlines — Delta had a pre-tax margin of 9.5 percent, up almost 2 points year-over-year. Free cash flow in the final three months of the year reached $1.8 billion.
We will wait to see if the Delta revenue machine slips in March after Glen Hauenstein retires and Joe Esposito (who will have the title of chief commercial officer) takes over. Esposito made what I think was his earnings call debut on Tuesday and promised no material changes to commercial strategy — something I’m sure analysts (who generally endorse Delta’s moves) appreciated.
Esposito steps in at an auspicious time. Executives on Tuesday said demand for air travel is strong, citing improved corporate revenues (up 8 percent in the fourth quarter), robust premium demand (up 7 percent), and growing loyalty income. Add that to the goodness of industry consolidation (Allegiant and Sun Country intend to merge, and something needs to happen with Spirit), and lots of things seem to be going Delta’s way.
Delta’s guidance backs that up. Though the first quarter is often weak, Delta predicted it will turn a small profit, with earnings per share of 50-90 cents and an operating margin of 4.5-6 percent. For all of 2026, Delta expects to grow its earnings per share by about 20 percent (to $6.50-7.50), with about $3-4 billion in free cash flow, after it invests about $5.5 billion in the airline.
Let’s turn to highlights from the Delta call, including why it ordered Boeing 787s, why it intends to add some Asia flights, why it has some concern about how the government may treat credit card programs, and why it is moving slowly as it tests a basic-style extra-legroom fare.
And yes: also that United news.