Delta Air Lines Q2 performance exceeded expectations, restarting annual profit targets highlights demand rebound

According to Zhitong Finance APP, Delta Air Lines (DAL.US) announced its second-quarter financial report before the market opened on July 10, Eastern Time, with Q2 revenue of approximately $16.65 billion, flat compared to the same period last year; adjusted earnings per share were $2.10, exceeding the average analyst expectation of $2.07 from Bloomberg. After canceling its full-year profit target three months ago, Delta released new annual profit expectations on Thursday. This move sends a positive signal: market demand is gradually recovering after the initial impact of U.S. President Donald Trump's tariff war.

As the first major U.S. airline to report quarterly results, Delta's statement reflects confidence in the market for the second half of the year. In the financial report released on Thursday, Delta projected adjusted earnings per share for this year to be between $5.25 and $6.25. Boosted by this news, Delta's stock price surged 9.6% in pre-market trading, also lifting the stock prices of other U.S. airlines.

Although the midpoint of this range, $5.75, is higher than the average analyst expectation of $5.35, it is still lower than the forecast made in January when Delta indicated that annual adjusted earnings per share would exceed $7.35. In April of this year, due to the chain reaction caused by Trump's complicated trade policies on U.S. businesses, Delta became the first U.S. airline to cancel its full-year earnings guidance.

Delta expects adjusted earnings per share for the third quarter to be between $1.25 and $1.75 (with the average analyst expectation at $1.33), with revenue flat or growing by 4%.

Delta's performance growth is attributed to several high-margin businesses, including increased sales of premium tickets, growth in frequent flyer program credit card spending, revenue sharing with American Express, cargo operations, and internal maintenance services. These businesses contributed 59% of total revenue in the quarter.

Will the airline industry's downturn be reversed?

In the first half of this year, the airline industry faced multiple incidents, air traffic control disruptions, and other issues, compounded by consumer concerns about inflation and trade conditions in early 2025, leading to a sharp decline in domestic air travel demand in the U.S.

At the beginning of the year, the airline industry experienced frequent accidents, including a collision between an American Airlines Group plane and a military helicopter in January, resulting in 67 fatalities. The decline in domestic travel demand caused by economic and trade uncertainties has severely impacted U.S.-focused airlines like JetBlue Airways (JBLU.US) and Spirit Airlines.

International premium travel and frequent flyer travel remain bright spots, but demand for economy class travel, both domestically and internationally, has stagnated. Airlines have begun to attract passengers through price reductions; however, demand still significantly declines during non-peak travel periods.

Airline stocks have performed poorly this year; as of Wednesday, the S&P Super Composite Airline Index has fallen nearly 16% year-to-date, while the S&P 500 Index has risen about 6.5% during the same period.

Delta CEO Ed Bastian stated in an interview that as Trump's tax cuts and spending plans are approved and tariff negotiations make progress, demand for air travel in the U.S. is gradually recovering.

"People are starting to see future trends clearly, which gives them the confidence to make plans, whether for travel or business investment," Bastian said. "The current environment is very stable." As the decline in demand has been curbed, airlines represented by Delta Air Lines are expected to report second-quarter results that will generally align with previous guidance. It is still unclear how many airlines will issue new full-year outlooks, but some industry analysts have made pessimistic predictions for the remaining summer period, which is typically a golden time for airlines to earn revenue from summer vacation travelers.

Delta Air Lines had previously stated that it would slow down capacity growth after the summer in conjunction with other airlines in order to increase ticket prices.

"We originally expected to achieve growth this year and made corresponding plans," said Bastian. "Now we have adjusted our plans to focus on capacity and growth management in the second half of the year."