Premium Segmentation Gives Delta Air Lines Most of the Industry Profits and the Most to Lose

Delta Air Lines positions itself as a premium airline, with the highest revenue yield and among the highest costs per seat mile in the North American market. Even in the relatively harmonious 2015-19 period after the airline industry consolidated and fuel costs fell, Delta's industry-leading operating margins declined due to increased fuel, labor, and depreciation expense on almost flat capacity. While we believe Delta will continue to garner premium revenue yields, we see the spread between those yields and its overall costs more closely resembling the industry's in the long term, especially as postpandemic supply and demand return to some kind of equilibrium.