Delta Air Lines Lifts Revenue Outlook. Why the Stock Is Falling.

Delta Air Lines stock expects third-quarter (Photograph by Mario Tama/Getty Images)

Key Points

About This Summary

• Delta Air Lines reaffirmed its third-quarter earnings outlook but noted struggles filling economy-class seats.
• Delta’s president mentioned continued sluggish demand from lower-paying customers, despite corporate travel strength.
• Shares of Delta tumbled after the remarks, with revenue expected to grow between 2% and 4% this quarter.

Delta Air Lines boosted its third-quarter revenue outlook Thursday, but its stock fell after the carrier said it is struggling to fill economy-class seats.

During an appearance at the Morgan Stanley Laguna Conference on Thursday, Delta President Glen Hauenstein indicated that the carrier continued to see sluggish demand from lower-paying customers. Though the carrier sees continued strength in corporate travel, the main cabin economy-class continues to be “negative,” he added.

However, Hauenstein noted that Delta’s results rely less on economy fares, with more than 50% of its revenue coming from other categories. “We don’t need the main cabin to be positive to post positive returns,” he added.

Shares tumbled 3.8% to $59.06 following his remarks, making Delta the worst performer in the S&P 500 .

The company made similar comments in its second-quarter earnings release in July, noting that premium revenue “continued to outpace main cabin” as the former grew 5% from the previous year.

In remarks prepared ahead of the conference Thursday, Delta reaffirmed its earnings outlook for the third quarter ending in September. The company still sees earnings in the range of $1.25 to $1.75 a share.

Management also forecast revenue growth in the upper half of its prior guidance range, citing “improved demand trends and industry supply rationalization.” The company now expects revenue to grow between 2% and 4% in the quarter, an improvement from its previous outlook calling for flat to 4% growth.

Delta yanked its full-year earnings guidance in April, just one week after President Donald Trump unleashed a barrage of tariffs on key U.S. trading partners. The company warned at the time that growth had largely stalled against a backdrop of macroeconomic uncertainty.

Then, in July, the company restored its guidance, causing shares to surge. Hauenstein asserted in the earnings release that Delta continued to see resilience in its “diverse, high-margin revenue streams.” The company reaffirmed its full-year outlook on Thursday.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com