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Fueled by one of the busiest holiday travel seasons in U.S. history -- December 1, 2024 saw a record 3.09 mln travelers go through TSA screening -- Delta Air Lines (DAL) flew past Q4 EPS and revenue estimates, setting a bullish tone for the commercial airline industry as the Q4 earnings season approaches. Strong results were already widely expected, though, after rivals American Airlines (AAL) and Southwest Air (LUV) raised their Q4 revenue outlooks in early December. With that in mind, the focal point mainly rested on the company's guidance, which was also quite upbeat, providing shares of DAL and those of its peers with a major boost.

• DAL experienced an acceleration in demand throughout the quarter and that momentum has continued into 2025. To put the robust demand environment into perspective, DAL noted that four of the top ten revenue days in its history occurred during November and December, with strength seen across both the leisure and corporate businesses. The company's upside 1Q25 revenue guidance of $13.44-$13.69 bln (growth of 7-9%) reflects its confidence that travel demand will remain strong in the seasonally slower quarter.
• Not only has demand strengthened, but capacity growth at DAL and throughout the industry has also decelerated, creating a more favorable pricing dynamic. In Q4, DAL's available seat miles grew by 5%, compared to a 15% jump in the year-earlier period. Accordingly, unit revenue continued its upward trajectory as adjusted TRASM edged higher by 0.4% versus last quarter's 3.6% yr/yr decline.
• At the same time, DAL's premiumization strategy is paying dividends. Staying true to recent form, premium revenue growth outpaced main cabin growth at 8% compared to 2%. Moving forward, expanding premium seats will be a center point of DAL's growth strategy. In fact, during its Investor Day on November 20, DAL stated that it expects total premium seats to exceed main cabin seats by 2027.
• Turning to expenses, the story is a little more mixed. On the positive side, fuel costs eased during Q4, declining by 18% yr/yr to $2.41 bln. However, the company's FY25 guidance for EPS greater than $7.35 fell a bit short of expectations, indicating that rising wages and the impact of slower capacity growth will put upward pressure on non-fuel unit costs. The good news is, DAL expects efficiency gains to partially offset these factors, resulting in low-single-digit growth for non-fuel unit costs in FY25.

The main takeaway is that business is booming for DAL with the airline achieving double-digit growth in corporate, while all three of its international geographies (Atlantic, Pacific, and Latin America) grew sequentially and outperformed internal expectations. Barring an economic downturn, DAL looks poised to deliver strong financial results in FY25 as it capitalizes on rising demand for premium travel products.