Delta Air Lines Lifts 2019 Revenue Target
Delta Air Lines Inc has lifted its 2019 revenue forecast after reporting better-than-expected quarterly profits, boosted by robust travel demand and a renewed agreement with credit-card issuer American Express Co.
The US carrier said it is targeting full-year revenue growth of 5% to 7%, an increase from 4% to 6% previously, with the American Express deal expected to add about $500 million to 2019 revenue.
Total operating revenues grew 5.1% to $10.47 billion in the first quarter to March 31, as growth in premium ticket sales and the airline's maintenance business helped offset lower cargo volumes.
"Demand for Delta's product has never been stronger," President Glen Hauenstein in a statement.
So far this year, Atlanta-based Delta's stock has outperformed US rivals that own the Boeing 737 MAX, which was grounded worldwide in March following two fatal crashes.
Southwest Airlines Co, which has the world's largest MAX fleet with 34 jets, has cut its 2019 financial outlook, while American Airlines Group Inc trimmed its first-quarter revenue forecast on Tuesday after cancelling 1,200 flights due to the MAX grounding in the United States.
Delta did not update its own 2019 profit target but executives said on a conference call they were "cautiously optimistic" that earnings would come in toward the top-end of guidance.
CEO Ed Bastian declined to comment on whether the carrier was picking up customers from competitors that are cancelling flights due to the MAX suspension.
Second Quarter Expectations
Delta expects second quarter profit in the range of $2.05 per share to $2.35 per share, above the average $2.13 per share analysts had estimated, according to IBES data from Refinitiv.
The carrier forecast total unit revenue, a closely-watched measurement of revenues per available seat mile, to increase 1.5% to 3.5% in the second quarter.
"We think Delta's relatively higher share of business travelers, unit revenue premium to peers and stronger-than-peer cash generation argue for a premium valuation," said CFRA analyst Jim Corridore.
Net income rose to $730 million in the first quarter ended March 31 from $557 million a year earlier. On an adjusted basis, Delta earned 96 cents per share, beating expectations of 90 cents per share.
The results relieved investor concerns about the impact of a US government shutdown in January and severe weather during the period.