Delta Air Lines Earnings: Growth and Costs Leveling Off for Longer Term; Fair Value Estimate Up 15%

Delta Air Lines reported first-quarter financial results very close to our forecast and indicated it expects another record summer travel season this year. The airline is operating at similar capacity levels to 2019, with 10% more staff and nearly 3.5 cents more in structural unit costs. Management previously reined in its expectations for 2024 capacity growth and said the company will shift focus to “optimizing” the routes and fares it operates, meaning it will look to increase their profitability over time. While we expect no-moat Delta will likely persist in its ability to book higher revenues per seat than the industry average, we expect a more competitive environment in the medium term as capacity eventually laps 2019 levels and consumer spending normalizes.