Delta Air Lines, Inc. Q4 FY2025 earnings call

• Operational performance: Delta continues to set the standard for reliability and customer experience, with the number one net promoter score among major airlines and being named the US industry's most on-time airline for the fifth consecutive year by Cirium.
• Financial performance: Delivered strong results in 2025, including record revenue, operating margin, and free cash flow. Maintained a solid balance sheet with reduced leverage.
• Strategic initiatives: Expanding international footprint, renewing and expanding wide-body fleet with an order for 30 Boeing 787-10s with options for 30 more. Deepening partnerships with American Express, Uber, and YouTube. Enhancing digital platform DELTA Sync with over 1.15 billion annual logins. Optimizing travel experience with initiatives like Uber Airport Express drop-off.
• People-related: Awarded a 4% pay increase in 2025 and will distribute $1.3 billion in profit sharing in February 2026.

Full year: Record revenue of $58.3 billion, operating margin of 10%, pretax income of $5 billion, earnings of $5.82 per share. Free cash flow was $4.6 billion, the highest in Delta's history. Over the past three years, generated $10 billion in free cash flow, strengthening the investment-grade balance sheet and reducing leverage by over 50%. Return on invested capital of 12% is well above the cost of capital. December: Record revenue of $600 million, 1.2% higher than in 2024, with diversified revenue streams leading with high single-digit growth year over year. Full year non-fuel unit cost: Grew 2%, in line with the long-term target of low single-digit. 2026 guidance: Expected EPS growth of 20% year over year, revenue growth of 5% - 7% in March, first-quarter EPS of $0.50 - $0.90, operating margin of 4.5% - 6%, free cash flow of $3 billion to $4 billion, and leverage of 2x by year-end. Non-fuel cost expected to be within the long-term framework of low single-digit.

• 2026 is expected to have EPS growth of 20% year over year.
• Revenue is projected to grow 5% - 7% in March.
• First-quarter EPS is expected to be $0.50 - $0.90 with an operating margin of 4.5% - 6%.
• Full-year free cash flow is anticipated to be $3 billion to $4 billion, and leverage will reach 2x by year-end.
• Non-fuel cost is expected to remain within the long-term framework of low single-digit.
• 2026 CapEx is planned at $5.5 billion, including around 50 aircraft deliveries.

• Policy changes: Potential legislation regarding credit card rate caps could impact the business, especially affecting lower-end consumers' access to credit.
• Economic uncertainty: Fluctuations in the US economy may influence consumer travel demand and corporate travel spending.
• Industry competition: Intensified competition could lead to fare pressure and market share battles.
• Operational recovery: Challenges in pilot contract changes and other factors may affect flight on-time performance and overall operational reliability.

Q: Oh, hey. Good morning. And, look. Nothing but accolades from the JPMorgan team. Glen, you've always been so gracious and patient with us. We're really gonna miss these interactions. Thank you so much. First question for Ed. You know, I know it's early innings, but if this 10% rate cap is, you know, codified and becomes reality and withstands legal scrutiny and all that kind of stuff, where does that leave Delta relative to your competitors? I mean, you have higher card fees. You lean into premium. If industry loyalty does take a hit, is the natural conclusion that higher-end loyalty outperforms lower-end, or should we be thinking about it differently?

A: Well, thanks, Jamie, and I could not agree with you more about your comments about Glen. You know, as you said in preface, it's late early innings. And so it's really, really hard to speculate. And candidly, the challenges to having that comment of whatever the president is looking to do here brought into actual delivery I'm informed with likely require legislation. And I believe your company was out this morning with some pretty strong comments in terms of their disagreement and willingness to fight that potential order. That all said, we at Delta have the premium card in the industry. No question, the value of what we've been created to distinction differentiation, if it did come to pass, would be greater. I think one of the big issues and challenges with the potential order is the fact that it would actually restrict the lower-end consumer from having access to any credit. Not just what the interest rate they're paying, which would upend the whole credit card industry. So from our standpoint, we'll be working closely with American Express, but I don't see any way we could even begin to contemplate how that would be implemented.

Q: Oh, yeah. Hey. Good morning, everyone, and kinda echo Jamie's words. I mean, Glen, you know, you're an industry thought leader and innovator. I mean, always willing to push the envelope. I mean, I just I feel privileged to have had the opportunity to have learned from you for all these years. So thank you. Thank you. Thank you for the kind words. And I guess with that, you'll get you'll get my last question. I have really only one question here and just sort of drilling down. I mean, this acceleration that we are seeing on demand from the fourth quarter into March, I mean, you talk about all groups and all geographies. But as I recall, you know, in the past, you did talk about that the leverage was maybe going to be in the main cabin in 2026. And I wonder whether or not you are seeing that the lower end of the fare structure is truly moving up, and that's helping to drive that acceleration. And combined with that, just the booking curve, I mean, is there any have we seen the booking curve really shift to normality, or are there any sort of idiosyncrasies about that curve that are maybe helping that acceleration? So, you know, just the revenue down.

A: Sure. The revenue has definitely accelerated here. And we're very excited about it. And it's across all entities. It's across all geographies. The booking curve really hasn't moved out that far. It's just kind of returned to a more normal level. I think what happened in the fourth quarter, it was all over the place, right, is that the time we got to the shutdown in November and we had, you know, the Secretary of Transportation questioning the safety of air traffic control. There was a lot of noise in the fourth quarter. And so I do think if we took out that noise and saw where we were in October and see where we are sitting today. We are a step above where we were in October, which was a fantastic month for the company. And what's really exciting about the return of business as we head into '26 is 'twenty five grew I think it's 8% it grew. But it was mostly unfair. And right now, we're seeing both fair and traffic. And so seeing that traffic come back is, I think, a really good start to 2026.