DAL Beats Q2 Earnings Estimates Riding on Premium Business Strength

Delta Air Lines DAL reported second-quarter 2026 earnings (excluding 88 cents from non-recurring items) of $1.56 per share, beating the Zacks Consensus Estimate of $1.51. Earnings declined in double digits (% wise) from a year ago as sharply higher fuel costs pressured profitability.

Revenues rose on a year-over-year basis to $17.67 billion but missed the consensus estimate of $17.76 billion. Broad demand strength lifted adjusted total revenue per available seat mile, or TRASM, 12.4%, while premium and diversified revenue streams continued to expand.

DAL Benefits From Broad-Based Revenue Strength

Passenger revenues increased 13% year over year to $15.61 billion. Premium-product ticket revenues climbed 17% to $6.92 billion, while main-cabin ticket revenues rose 8% to $6.85 billion. Loyalty travel awards and travel-related services revenues grew 14% and 11%, respectively.

Premium products and diversified revenue streams generated $10.82 billion, up 18%, and accounted for 61% of adjusted operating revenues compared with 59% a year earlier. Management cited yield strength, continued premium-seat investments and stronger customer engagement as major contributors.

Delta Posts Gains Across Key Markets

Domestic revenues advanced 15% year over year to $10.67 billion, supported by 12%-unit revenue growth and a 13% increase in yield. Atlantic revenues rose 8% to $3.11 billion, with unit revenues up 7% and capacity increasing 1%.

Pacific revenues increased 15% to $832 million as capacity expanded 8%. Latin American revenues grew 4% to $990 million despite a 7% capacity reduction, reflecting 12%-unit revenue growth and a 13% improvement in yield. Corporate sales increased at a double-digit rate across all sectors, led by Aerospace & Defense, Banking and Automotive.

Revenue passenger miles (a measure of air traffic) inched up 1% to 66.77 billion. Capacity (measured in available seat miles) expanded 1% to 78.7 billion. Consolidated passenger load factor (% of seats filled by passengers) decreased to 84.8% from 85.5% a year ago.

DAL Sees Momentum in Diverse Revenue Streams

Cargo revenues surged 39% year over year to $294 million, driven primarily by volume growth. Maintenance, repair and overhaul revenues increased 32% to $315 million, mainly reflecting strength in legacy engine platforms.

Loyalty and related revenues rose 19% to $1.34 billion. American Express remuneration increased 16% to $2.4 billion, aided by accelerating card acquisitions and the seventh consecutive quarter of double-digit cardholder spending growth. Travel products and non-air partnership revenues advanced nearly 20%.

Delta’s Fuel Costs Weigh on Margins

Adjusted operating expenses increased 20% year over year to $16.1 billion. Adjusted fuel expense jumped 77% to $4.41 billion as the adjusted average fuel price climbed 75% to $3.93 per gallon. Fuel consumption inched up 1% to 1.12 billion gallons.

Adjusted operating income declined 24% to $1.56 billion, while the adjusted operating margin contracted 450 basis points to 8.8%. Non-fuel costs rose 8% to $11.09 billion, and non-fuel unit costs increased 6.8% to 14.09 cents.

DAL Generates Cash and Reduces Debt

Adjusted operating cash flow totaled $1.65 billion in the June quarter, down 10% year over year. Gross capital expenditures increased 23% to $1.44 billion, leaving free cash flow of $209 million compared with $733 million in the prior-year period.

Adjusted net debt was $13.59 billion at quarter-end, down $709 million from the end of 2025 and $2.73 billion year over year. Delta ended the quarter with $4.67 billion in cash and cash equivalents and $7.7 billion in liquidity, including $3.1 billion of undrawn revolving credit capacity.

Delta Issues Upbeat Q3 Outlook

For the third quarter of 2026, Delta expects adjusted earnings of $2.00-$2.50 per share. The Zacks Consensus Estimate is currently pegged at $1.93 per share. The company projects an adjusted operating margin of 11-13% and mid-teens year-over-year revenue growth on modest capacity expansion. Fuel cost per gallon is expected to be $3.15.

Management expects unit revenue growth to improve sequentially and non-fuel unit cost performance to improve modestly from the June quarter.

Full-Year 2026 Outlook Reaffirmed by DAL

Delta expects adjusted earnings guidance of $6.50-$7.50 per share. The Zacks Consensus Estimate is currently pegged at $5.78 per share. Delta anticipates free cash flow in the $3-$4 billion range. The company also expects gross leverage of approximately two times by year-end.

DAL’s Zacks Rank

Currently, DAL carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Earnings Release of Other Transportation Companies

J.B. Hunt Transport Services JBHT is scheduled to report second-quarter 2026 earnings on July 15. The Zacks Consensus Estimate for second-quarter 2026 earnings has been revised 0.6% upward over the past 60 days. JBHT’s earnings beat the Zacks Consensus Estimate in three of the preceding four quarters and missed in the remaining one, the average surprise being 6.3%. 

Union Pacific UNP is scheduled to report second-quarter 2026 earnings on July 23.

The Zacks Consensus Estimate for second-quarter 2026 earnings has been revised 0.3% upward over the past 60 days. UNP’s earnings beat the Zacks Consensus Estimate in three of the preceding four quarters (missing the mark on the other occasion). The average beat is 2.3%. 

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This article originally published on Zacks Investment Research (zacks.com).

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