Delta Air Lines Well Positioned for Future Growth Due to High-Income Travelers, Millennials

By Connor Hart

Delta Air Lines said it is well positioned heading into the new year and beyond, expecting to improve its operating margins in the mid-teen percent range, as well as increase its per-share earnings by 10% and grow free cash flow between $3 billion and $5 billion annually over the next three-to-five years.

The Atlanta-based carrier at a conference with investors Wednesday said capacity -- a measure of an airline's total available flights and seats -- is anticipated to increase between 3% and 4% next year. In the same frame, revenue is expected to grow in the mid-single digits.

These gains stem from strength among premium consumers and younger people, as both groups prioritize spending on experiences and are still willing to pay for plane tickets despite ongoing inflationary pressures, the company said.

High-income travelers account for roughly three-quarters of air-travel spend, according to the company. Among this group, leisure travel is the highest-priority purchase.

Millennials, who have more wealth than prior generations at the same age, are leading this charge. Two-thirds of millennials are willing to spend on luxury travel, the airline said. The group -- which encompasses those born in or after 1981 -- makes up the company's fastest-growing customer segment, along with Gen Z -- generally defined as those born after 1997.

Delta said it will support this growth with plans to continue investing in new technologies and cloud infrastructures, modernizing its platforms and software, as well as integrating more data and analytics into its operations. The company plans to reinvest about a half of its annual operating cash flow into these initiatives, reserving the other half to pay down debt, repurchase stock and increase shareholder returns.

The airline backed its fourth-quarter guidance for per-share earnings between $1.60 and $1.85, as well as operating margins between 11% and 13%.

Write to Connor Hart at connor.hart@wsj.com

(END) Dow Jones Newswires

November 20, 2024 06:30 ET (11:30 GMT)

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