Airlines Delta expects higher profits thanks to premium travel and 'resilient economy'

　　Delta Air Lines said on Wednesday that sales will grow in 2025, citing "economic resilience" and strong demand for travel and credit card spending, especially for premium products. The company also said it expects earnings to grow in the coming years.

　　Delta forecast revenue growth of a mid-single-digit percentage point next year compared with 2024, in line with analysts' expectations for about 6% growth. Costs will continue to rise, with costs next year (excluding fuel) expected to be in the low single digits, Delta said in a press release.

　　In an investor day presentation, Delta said its flight count will increase by 3% to 4% next year, starting in 2024. Delta also reiterated its fourth-quarter outlook. Longer term, the company said it expects adjusted earnings to grow 10% annually over the next three to five years.

　　Delta is the most profitable U.S. airline, and its leadership touts its close partnership with American Express and booming demand for premium seats at the front of its planes as keys to its success. The company expects to receive $7 billion in payments from American Express this year, with a long-term goal of $10 billion.

　　The airline focuses on high-spending travelers and said in an investor day presentation that it has an advantage because wealth among high-income households has grown sharply since 2019. The company also said millennials and Generation Z are the fastest-growing consumer groups.

　　The company's optimism about consumer spending differs from the picture painted by some other companies. Target cut its profit forecast on Wednesday. The company's chief operating officer blamed "decelerating discretionary demand" and rising costs.

　　Delta rival United Airlines has made progress in increasing profits and attracting high-end travelers. As of Tuesday's close, Delta shares have risen 60% so far this year, while United shares have risen 128%. Both companies' shares have outperformed the broader market and other airlines.

　　Delta said only 43% of its revenue this year came from main-cabin tickets, with 57% coming from premium seats and its lucrative loyalty program. That's up from 60% of main-cabin revenue in 2010.

　　The airline said it expects sales of premium seats alone to surpass sales of economy seats by 2027. Delta, American, United and JetBlue Airways are racing to add more spacious premium seats, such as lie-flat suites, to their planes.

　　The airline has been trying for years to get passengers to pay for first class, which has been essentially free in previous years.

　　About 15 years ago, about 12% of Delta's domestic first-class seats were paid for, with the rest upgraded by frequent flyers, Delta President Glen Hauenstein told reporters. Now, more than 70% of first-class seats are paid for, including after booking. He said the change was "painful" for some travelers at first.

　　Delta and its competitors, which for years have divided economy cabins into premium economy, extra legroom seats and basic economy options, are looking for new ways to segment cabins, Hauenstein said. Hauenstein said Delta is also considering more options for passengers sitting at the front of the plane, although he didn't provide details.

　　Hauenstein said Delta's further segmentation experiments will start in economy, not at the front of the plane.

　　“Over the next few years, you’ll see us continue to try and really test what consumers want out of a package and what they’re willing to pay for,” Hauenstein said.

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