Delta Air Lines just capped its centennial with record revenue, record free cash flow and a new plane order, even as its CEO warns that “the bottom rung” of the industry “is in big trouble” and Wall Street remains at the forefront of fares and the economic fragility of budget flying.
America’s most profitable airline used its fourth-quarter 2025 earnings conference call Tuesday to argue that travelers seeking premium, high-revenue products — and the loyalty ecosystem built around them — are protecting it from the turmoil hitting low-cost rivals and nervous investors. CEO Ed Bastian has also spoken openly about struggles elsewhere in the industry. “The lower end of the industry, on the raw materials side, is having a lot of trouble,” he told analysts on the earnings conference call. The economic woes of average Americans don’t seem to be affecting Delta’s profits, however.
Delta said it expects adjusted earnings per share to be between $6.50 and $7.50 in 2026, up from $5.82 for 2025. Those are impressive numbers and would be a record for Delta, but the airline has been tracking toward $6 per share in October 2025 and upwards of $7.35 per share for 2025 before fares begin to bite. Traders sent Delta shares down more than 3% as even another year of strong profits fell short of the Atlanta flagship carrier’s pre-fare forecasts.
Record year at 30,000 feet
Delta reported record annual revenue of $58.3 billion in 2025, up 2.3% year-over-year, with an operating margin of 10% and pre-tax profit of $5 billion, cementing its status as the U.S. profit industry leader. Free cash flow reached $4.6 billion, the highest in Delta’s history, helping the carrier cut its debt load by more than half in three years and leaving it with what executives called the strongest balance sheet and credit quality it has ever had.
In the December quarter, Delta generated $14.6 billion in revenue – also a record – while posting an operating margin of 10% and earnings of $1.55 per share, slightly above expectations despite a revenue shortfall and disruptions from the government shutdown and FAA-mandated flight reductions. The company is guiding investors toward 20% earnings per share growth in 2026, with $3 billion to $4 billion in free cash flow and approximately 3% capacity growth, all concentrated in higher-margin premium cabins.
Bastian and his management team have made it clear that the driving force behind these results is Delta’s premium customer base and an increasingly sophisticated merchandising model that charges more for better seats and flexibility. Chairman Glen Hauenstein, who will retire next month after shaping the airline’s business strategy for two decades, said premium revenue grew 7% in 2025 and that diversified, higher-margin lines (premium, loyalty, cargo, maintenance and travel) now account for 60% of total revenue.
Delta’s partnership with American Express remains central to this premium focus, with co-branded compensation up 11% to $8.2 billion last year on more than 1 million new card acquisitions and double-digit spending growth each quarter. About a third of active SkyMiles members now have a Delta Amex card, and the airline expects high-single-digit growth in co-brand compensation in 2026 as it strives to reach a $10 billion goal within a few years. Hauenstein said Delta sees “a significant road ahead as member engagement and penetration continues to increase.” (Like Delta, American Express has reported a string of runaway profits, driven by increased spending by the same cohort of affluent Americans willing to spend.)
The “bottom of the ladder” of the industry under pressure
Throughout the celebration, Bastian used some of his sharpest language yet about the divide that is opening within U.S. aviation between premium network carriers and low-cost airlines that rely on rock-bottom fares. Citing the collapse or restructuring of several low-cost players and slowing growth of ultra-low-cost carriers, he pointed to industry consolidation earlier this week, with Allegiant and Sun Country announcing a $1.5 billion merger. He said Delta was “waiting to see what happened with Spirit” while the low-cost carrier was in bankruptcy.
“This sector has not been able to develop here in recent years,” he concluded, “and when this sector does not develop, it cannot contain its CASM. [cost per available seat mile]. Its CASM increases significantly each quarter, more than ours. It has therefore become a real challenge for this sector of the industry. In other words, the only play for airline profits is to increase spending by high earners, and fortunately Delta is prepared to capitalize on that in what economists broadly call a “K-shaped economy,” with the rich prospering and the poor suffering in opposite directions.
Bastian predicted “further rationalization” among carriers that are not earning their cost of capital, saying this could happen through consolidation, liquidation or internal restructuring as investors lose patience with business models built on cheap seats that no longer cover costs. Hauenstein argued that 2025 showed how much the gap had widened, saying Delta had likely captured a higher share of total U.S. airline profits than ever before because its competitors were “very challenged.”
At this point, Delta’s Main Cabin customers – who are more price sensitive – remain a weak spot in an otherwise stellar story. Bastian acknowledged that while revenue trends accelerated sharply in early 2026 and booking records were set last week, “we haven’t really seen the Main Cabin move yet,” adding that reaching the top of the company’s guidance range “would definitely mean the Main Cabin would start to move.”
The hesitation comes against the backdrop of Trump-era tariffs that have roiled markets and travel demand in 2025. Bastian described a year of volatility that delayed what he still sees as a possible reset of pricing for the industry’s lower tier. He warned that, even with a strong start to the year and corporate customers reporting more travel, Delta needs to “exercise a little caution” in its outlook after 2025 was sidetracked by political shocks and economic nervousness.
Any new seat growth this year will be in premium cabins, and executives have touted the added benefits of “merchandising” tools that divide each product into basic, primary and supplemental tiers, allowing customers to pay more for perks such as prior seat assignments or refunds. Hauenstein said these retail initiatives represent “multibillion-dollar opportunities” in the coming years, promising more revenue for the same travelers even if main cabin demand is slow to catch up.
For this story, Fortune journalists used generative AI as a research tool. An editor checked the information for accuracy before publishing it.
