Why Delta's Premium Passengers Are Driving Its Next Leg Up

Delta Air Lines Inc. (NYSE:DAL) is showing renewed confidence in its financial future after reporting strong second-quarter results and reinstating its full-year 2025 guidance. The airline’s performance was driven by a notable increase in high-margin revenue streams, including premium travel and loyalty programs.

On Thursday, Delta reported a 1% year-over-year increase in June-quarter revenue. This growth was fueled by a 5% rise in premium cabin sales, an 8% climb in loyalty revenue, and a 10% increase in remuneration from American Express (NYSE:AXP), reaching $2 billion. Despite these gains, adjusted unit revenue declined by 3%, reflecting the impact of a 4% capacity increase.

Following these results, Bank of America Securities (BofA) analyst Andrew G. Didora reaffirmed his Buy rating for Delta and raised the price forecast from $60 to $67. Didora believes that the ongoing strength in premium revenue will be a key driver for Delta’s third-quarter and full-year 2025 outlook, allowing the airline to outperform competitors that are more reliant on main cabin performance.

Also Read: Delta Air Lines Weathers The Storm: CEO Expects ‘Demand To Accelerate’ To Wrap 2025

In the second quarter of fiscal 2025, premium cabin revenue outpaced main cabin revenue by a notable 1,020 basis points, underscoring sustained demand for high-end travel. This premium advantage is crucial to Delta’s industry-leading pre-tax margins and distinguishes its operating model from more price-sensitive rivals.

Reflecting this strength, Didora upgraded his 2025 and 2026 EPS estimates by 4% and 19%, respectively, to $5.55 and $6.59. He maintained a 6x multiple on projected 2026 EBITDAR, supporting his raised price forecast of $67.

Looking ahead, analysts anticipate Delta will generate strong free cash flow and prioritize debt reduction and dividends over share buybacks. The airline aims to halve its net leverage by 2027, a strategic move to reduce long-term financial risk and reinforce balance sheet discipline. Delta also plans a 25% increase to its quarterly dividend beginning in the September quarter.

Other recent analyst updates are positive: Barclays analyst Brandon Oglenski maintained an Overweight rating and raised the price forecast from $58 to $65. At the same time, Morgan Stanley analyst Ravi Shanker also maintained an Overweight rating and increased the price forecast from $88 to $90.

Investors can gain exposure to the stock via the U.S. Global Jets ETF (NYSE:JETS) and the Defiance Hotel, Airline, and Cruise ETF (NYSE:CRUZ).

Price Action: DAL shares are trading lower by 2.41% to $55.44 at last check Friday.

Read Next:

• US 500% Tariff On Russia Can Rattle Energy Stocks And Have ‘Major Negative Implications’ On Global Economy, Says Craig Shapiro

Photo by Angel DiBilio via Shutterstock