Key Takeaways
- Delta said at its annual investor day presentation Wednesday that premium customers are “thriving” in the current economy.
- The higher-income consumers who take advantage of Delta’s premium offerings make up about three-quarters of overall air travel spending.
- The airline said it expects premium revenue to surpass main-cabin revenue by 2027.
Delta Air Lines (DAL) said Wednesday that it sees significant room for its premium offerings to grow over the next several years, thanks to a “thriving” premium consumer.
In its investor day presentation, Delta said higher-income households, which comprise 75% of overall air travel spending, have about 40% more “household wealth” than they did in 2019. Delta cited a recent survey showing that leisure travel is the “highest priority purchase” over the coming four months for those households earning more than $100,000 annually.
Delta said it has watched travel demand grow across generations, with millennials (generally born between 1981 and 1996) and Gen Z (generally born between 1997 and 2012) the airline’s fastest-growing customer groups. The company said millennials are largely willing to spend on “luxury travel” and that air travel spending is growing faster than overall spending across generational lines.
Delta Forecasts Travel Demand Will Drive Growth
The airline expects demand for travel to fuel its growth in the next several years. Delta affirmed its outlook for the fourth quarter and said it expects revenue to grow by mid-single digits in 2025 compared with 2024. Seating capacity is expected to expand from 3% to 4%, and non-fuel costs are expected to rise by low single digits.
Over the next three to five years, Delta said it expects earnings per share (EPS) to grow by an average of 10% annually as it plans to experiment with new premium offerings and improve its margins. By 2027, Delta said it expects premium revenue to become a larger source of ticket revenue than main-cabin tickets as it continues to shift to its premium products.
Delta shares were down 2% today but have gained nearly 60% since the start of the year.