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Delta Air Lines (DAL-2.22%) is having a pretty good year so far. Its stock has climbed 57% since January 1, more than double the gains of the S&P 500. And despite the CrowdStrike (CRWD+0.25%) software outage that introduced far more chaos into its operations than its industry peers — to the tune of $500 million in losses — the carrier is still pulling in profits.
Now Delta wants to let its current and prospective shareholders know that it expects to have a pretty good 2025 as well. It’s not dealing with severe financial woes like Spirit Airlines. It’s not coming out the other end of a nasty proxy battle like Southwest Airlines. And it’s not battling to regain the trust of key constituencies like American Airlines. So its upcoming Investor Day should prove to be a pretty low-key affair.
Maintaining a comfortable cruising altitude is sometimes easier said than done; investors will be looking to see if Delta can stay on course. Next year marks the company’s 100th anniversary — with a rockstar launch to come in Las Vegas — and it looks like Delta will get to have its birthday cake and eat it, too.
On top of the world
Delta is the largest airline in America by market share according the Department of Transportation, edging out the likes of fellow majors Southwest and American Airlines (AAL-0.39%).
The ratings agency Fitch restored Delta’s investment-grade credit rating this July after cutting it to junk during the early years of the COVID-19 pandemic. When it did so, it specifically cited Delta’s best-in-class market share as part of its rationale.
“Delta’s investment grade rating is supported by its position as a leading network airline in the consolidated U.S. market,” the agency said. “Dominant positions in key hubs and a high level of network utility provide a competitive advantage over smaller airlines.”
When Delta presented its most recent earnings report in October, one of the biggest headlines coming out of the release was a focus on the potential for election-week flying jitters to ding what is expected to be an otherwise robust fourth quarter.
Building a moat
With Delta’s top-flight status secured, its next step is ensuring that it stays on top. Though there has been some focus on its efforts to swoop down to poach customers from low-fare airlines, its higher-profile customer-development schemes are trained on squeezing more money out of first- and business-class flyers who desire luxurious experiences, which just so happen to be much more profitable to provide.
Per airline analyst Tom Fitzgerald at TD Cowen (TD+1.14%):
We expect customer demographics to be a focus, both the company’s efforts around cultivating long-term relationships with clients as their desired cabin section progresses upward along their careers, as well as the opportunity around baby boomers and older members of Gen X who are able to fund premium travel out of robust nest eggs.
After all, enormous and exclusive airport lounges are not a loss-leader proposition.
Domination built to last
During that last earnings call, analysts kept asking Delta’s executives if they could shed some light on the carrier’s long-term plans. The c-suite was cagey with specifics, but one theme of the executives’ comments was that everything seemed to be firing on all cylinders and would continue to do so. CEO Ed Bastian said that his company’s inertial sturdiness was one of its most prized assets.
“It’s really hard to change course and to try to catch what is a train that’s moving at a pretty good speed … and so, we’ll continue on the pace we’re on,” he said. “We’re not going to change course. If anything, we’re just going to continue to accelerate.”