Additional Coverage:
- Delta sees wealthy high fliers leading to another record year—but its CEO sees the main cabin ‘struggling greatly’ (fortune.com)
Delta Soars to Record Heights While Budget Airlines Face Turbulence
Atlanta, GA – Delta Air Lines has concluded its centennial year with unprecedented financial success, reporting record revenue and free cash flow for 2025, alongside a new jet order. This achievement comes even as CEO Ed Bastian highlights significant struggles within the “bottom end” of the airline industry, and Wall Street remains wary of tariffs and the precarious economics of budget flying.
During its fourth-quarter 2025 earnings call on Tuesday, America’s most profitable airline emphasized that its focus on high-income, premium-seeking travelers and a robust loyalty program has shielded it from the challenges impacting lower-cost competitors and nervous investors. CEO Ed Bastian openly acknowledged the difficulties elsewhere, stating, “The bottom end of the industry on the commodity side of the business has been struggling greatly.” This suggests that the economic hardships faced by average Americans are not hindering Delta’s profitability.
Delta projects adjusted earnings per share (EPS) for 2026 to be between $6.50 and $7.50, a notable increase from $5.82 in 2025. While these figures would represent a new record for Delta, the airline’s initial guidance in October 2025 was $6 per share, and it had previously projected over $7.35 per share for 2025 before tariffs began to impact the market. Traders reacted by sending Delta shares down more than 3%, indicating that even record profits aren’t quite meeting the Atlanta-based carrier’s pre-tariff expectations.
Record Year at 30,000 Feet
Delta reported record full-year revenue of $58.3 billion in 2025, a 2.3% increase year-over-year, with a 10% operating margin and $5 billion in pre-tax income. This solidifies its position as the U.S. airline industry’s profit leader. Free cash flow reached an all-time high of $4.6 billion, enabling the carrier to halve its leverage over three years and achieve what executives describe as its strongest balance sheet and credit quality ever.
In the December quarter, Delta generated $14.6 billion in revenue-another record-while achieving a 10% operating margin and earnings of $1.55 per share. These results modestly exceeded expectations despite a revenue miss and disruptions from a government shutdown and FAA-mandated flight reductions. For 2026, the company is guiding investors toward 20% earnings-per-share growth, $3 billion-$4 billion in free cash flow, and approximately 3% capacity growth, primarily concentrated in higher-margin premium cabins.
Bastian and his executive team explicitly attributed these strong results to Delta’s premium customer base and an increasingly sophisticated merchandising model that offers better seats and flexibility at a higher price point. President Glen Hauenstein, who is set to retire next month after two decades guiding the airline’s commercial strategy, noted that premium revenue grew 7% in 2025. He added that diversified, higher-margin revenue streams-including premium, loyalty, cargo, maintenance, and travel products-now constitute 60% of total revenue.
Delta’s enduring partnership with American Express remains crucial to this high-end strategy. Co-brand remuneration increased 11% to $8.2 billion last year, driven by over 1 million new card acquisitions and consistent double-digit spend growth each quarter.
Roughly one-third of active SkyMiles members now hold a Delta Amex card, and the airline anticipates high-single-digit growth in co-brand remuneration in 2026, aiming for a $10 billion target within a few years. Hauenstein expressed confidence in “significant runway ahead as member engagement and penetration continues to rise.”
‘Bottom End’ of Industry Under Pressure
Despite the celebratory results, Bastian used some of his strongest language yet to describe the growing disparity within U.S. aviation between premium-focused network carriers and budget airlines reliant on rock-bottom fares. He cited the collapse or restructuring of several low-cost players and the stalled growth of ultra-low-cost carriers. He also noted recent industry consolidation, referencing the $1.5 billion merger announcement between Allegiant and Sun Country, and stated Delta was “waiting to see what happens with Spirit” as the low-cost carrier navigates bankruptcy.
“That sector has been unable to grow here for the last several years,” Bastian concluded. “And when that sector is not growing, it can’t contain its CASM [cost per available seat mile].
Its CASM goes up significantly every quarter, more than ours. And so that’s become a real challenge for that sector in the industry.”
In essence, the primary driver for airline profits currently relies on increased spending by high earners, a trend Delta is well-positioned to capitalize on amidst what economists often refer to as a “K-shaped economy,” where the affluent prosper while the less fortunate struggle.
Bastian predicted “further rationalization” among carriers not earning their cost of capital, suggesting it could manifest through consolidation, liquidation, or internal restructurings as investors lose patience with business models built on cheap seats that no longer cover operational costs. Hauenstein argued that 2025 clearly demonstrated the widening gap, suggesting Delta likely captured a larger share of total U.S. airline profits than ever before while competitors faced “very challenged” conditions.
On this point, Delta’s own Main Cabin customers-who tend to be more price-sensitive-remain a weaker link in an otherwise strong narrative. Bastian acknowledged that while revenue trends have sharply accelerated into early 2026 and booking records were set last week, “we have not really seen Main Cabin move yet.” He added that reaching the top of the company’s guidance range “would definitely be the Main Cabin starting to move.”
This hesitancy follows Trump-era tariffs that unsettled markets and travel demand in 2025. Bastian described a year of volatility that delayed what he still believes will be an eventual reset in how the lower tier of the industry is priced. He cautioned that, even with a strong start to the year and corporate clients signaling increased travel, Delta must “have a bit of caution” in its outlook after 2025 was disrupted by policy shocks and economic uncertainties.
All new seat growth this year will be concentrated in premium cabins. Executives highlighted further gains from “merchandising” tools that segment each product into basic, main, and extra tiers, allowing customers to pay more for benefits like earlier seat assignments or refunds. Hauenstein characterized these retailing initiatives as “multibillion-dollar opportunities” in the coming years, promising additional revenue from existing travelers even if Main Cabin demand remains sluggish.