The outlook for travel is improving as consumers and businesses regain economic confidence, according to Delta Air Lines.
The carrier reported a bigger quarterly profit than expected on Thursday, providing hope to investors that travel demand has stabilized after a rough start to the year.
The announcement, the first batch of earnings from a major U.S. airline for the second quarter, sent Delta’s share price soaring 12 percent on Thursday. And while the airline also lowered its financial forecast for the full year, that was seen as an improvement on the previous quarter, when Delta withdrew projections altogether amid rising economic uncertainty around tariffs, a pullback in travel among federal workers and traveler anxiety after several high-profile plane crashes.
Delta’s chief executive, Ed Bastian, said he expected consumer and corporate confidence to improve in the coming months, because of the certainty provided by the recent passage of a sweeping domestic policy bill and progress, of sorts, in global trade talks. That should pave the way for an acceleration in travel demand.
“We talk to a lot of businesses, a lot of leaders, and there’s a growing sentiment of confidence moving forward,” Mr. Bastian said on a call with analysts on Thursday. Still, he warned, “clearly we still have a long ways to go.”
Delta had started the year on a high note, saying in January that it expected to deliver the best financial performance in its 100-year history. But that outlook soured as the early stages of President Trump’s trade war rattled economic confidence. Federal government cuts also contributed to a slowdown in travel, as did anxiety among some consumers after fatal plane crashes in South Korea in December and Washington in January. A Delta flight was involved in a crash landing in February in Toronto, and all 80 people on board survived.
In April, the airline withdrew its financial forecast for the year, citing deepening uncertainty. Delta had feared that the worsening economic conditions could shake its target customers, households that earn at least $100,000 annually. That group, which makes up about 40 percent of U.S. households, has accumulated a lot of wealth in recent years, but volatile markets raised fears that they might pull back on travel, Mr. Bastian said. Those concerns have since eased, though, as markets recovered and people with means remained eager to fly.
“The fundamentals of the U.S. economy are solid,” he said. “Our core consumer is in good shape and continues to prioritize travel.”
While consumer travel demand had stabilized in recent months, it remained roughly flat in the second quarter of the year compared with the same period last year, Delta said. The airline’s bottom line benefited from faster growth in parts of its business with high profit margins, including the sale of premium-priced tickets, international travel and its credit card program.
Mr. Bastian also said he was “encouraged” by an industrywide trimming of flights in response to what many have described as an oversupply of seats, particularly the cheapest ones. In an eagerness to make the most of travel demand last summer, airlines flooded the market with flights, creating opportunities for deal-seeking customers, but also eroding profits, particularly for budget carriers.
Delta said it expected earnings for the year to be about 15 percent lower than what it had projected in January, before the economic turmoil generated by Mr. Trump’s tariffs and government job cuts. Delta is also not alone in lowering its expectations.
“This summer will be defined generally as demand did not come in as strong as we all thought six months ago,” Bob Jordan, the chief executive of Southwest Airlines, said in a recent interview with The New York Times.
Delta’s better-than-expected earnings may bode well for other large airlines with premium offerings, which are set to report financial results later this month, according to Tom Fitzgerald, an airline industry analyst for the investment bank TD Cowen. But it may not be as meaningful for smaller carriers that are more reliant on price-sensitive customers, he added.
“We came away reassured by Delta’s guidance,” Mr. Fitzgerald said in an analyst note. “The company has set a high bar for peers.”
Niraj Chokshi is a Times reporter who writes about aviation, rail and other transportation industries.
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