Airline executives say travel has become a top priority for consumers, who are cutting spending on goods in favor of experiences after the pandemic. This, together with hybrid work arrangements, has underpinned travel spending despite higher living costs.
Demand is particularly strong for premium travel, benefiting carriers like Delta, which has positioned itself as a premium airline. Recovery in corporate travel is also gathering steam.
"We anticipate continued strong momentum for our business," CEO Ed Bastian said.
The company said it generated record revenue in the March quarter and expects to deliver record revenue in the June quarter as well, helped by strong bookings for international trips and a pickup in travel spending by technology and financial services companies.
"Delta Air Lines kicked off airline reporting with a welcome respite from all of the Boeing talk, delivering solid results... Despite all of the aircraft issues in the industry, demand is still healthy and Delta's guidance is reflecting that," said Christopher Raite, senior analyst at Third Bridge.
Delta's results drove up the shares of other carriers as well, before some stocks pared gains and turned negative after hot inflation data that pressured the broader market.
United Airlines (UAL.O) climbed about 1.5%, while American Airlines (AAL.O) and Southwest Airlines (LUV.N) were marginally lower.
The International Air Transport Association IATA expects 4.7 billion people to travel in 2024, compared with 4.5 billion in 2019. In the United States, passenger traffic is estimated to reach an all-time high this year, according to trade group Airlines for America.
Carriers, however, are struggling with plane shortages, constraining their ability to supply more seats during peak travel periods, translating into stronger pricing.
Delta expects its unit revenue - a proxy for pricing power - to be flat, compared with last year, in all geographies except Latin America.
It also reported an improvement in the U.S. market as its domestic unit revenue turned positive in the March quarter, with an improvement of 7 percentage points from the previous quarter.
Signs of softening demand on domestic routes had sparked a sell-off in airline shares last year as investors feared the travel boom was coming to an end.
Delta is "still confident" that Boeing (BA.N) 737 Max 10 jets "will deliver at some point", CEO Bastian said in a CNBC interview after the results. The comment comes as U.S. regulators are investigating Boeing's safety and quality practices following a whistleblower's claims.
Delta forecast an adjusted profit of $2.20 to $2.50 per share in the quarter through June, compared with analysts' expectation of $2.23 per share, according to LSEG data. It expects to post an operating margin of 14% to 15%, with a 5% to 7% year-on-year increase in second-quarter revenue.
The company reaffirmed its forecast for a profit of $6 to $7 per share in 2024, with a free cash flow of $3 billion to $4 billion.
Its non-fuel costs rose at a slower-than-expected pace, thanks to a strong operational performance in the March quarter. Delta expects a 2% year-on-year increase in non-fuel costs in the current quarter.
Adjusted profit for the first quarter was 45 cents a share, compared with analysts' expectation of 36 cents per share.
