Delta Air Lines expects its earnings to improve in the coming quarters thanks to strict capacity and cost management, even as the industry continues to face persistent price pressure. The US airline has seen its bookings stabilize, an encouraging sign for an industry still reeling from the slowdown in demand.

The announcement was hailed by the markets, with Delta's stock gaining 9% in early trading on Wall Street. Its competitors United Airlines and American Airlines also posted strong gains.

Stabilization of demand

Like other carriers, Delta suspended its annual forecasts for 2025 in April amid uncertainty over the trade war launched by President Donald Trump, which had eroded business and consumer confidence, weighing on bookings.

In April, CEO Ed Bastian's alarmist speech made a lasting impression: "I don't care if you call it a recession or not, in this industry it's a recession."

Three months later, the tone is very different as industry leaders are seeing demand stabilize. However, passenger traffic in the US remains below last year's levels, leading to a widespread decline in airfares, as official data shows.

Delta's Q2 results reflect this trend. While bookings have stabilized at last year's levels, the airline continues to face pricing pressure, particularly on domestic flights.

In an attempt to reverse this trend, airlines plan to reduce capacity after July to align seat supply with still fragile demand and support prices.

Delta is counting on this rationalization of supply to improve its unit revenue, a key indicator of profitability per seat, in the second half of the year. At the same time, the airline intends to maintain - or even reduce - its non-fuel operating costs in Q3 compared to last year.

Lower oil prices are also helping to contain costs in a sector where jet fuel accounts for a significant portion of expenses. At Air France, for example, it accounts for between 20% and 30% of operating costs.

Focusing on premium services

Despite the slowdown in global demand, Delta and United Airlines appear to be better equipped than others thanks to their diversified revenue streams, dynamic premium offerings, and the growing strength of their loyalty programs.

Delta saw its premium ticket revenues increase by 5% year-on-year in Q2, while main cabin sales declined. Loyalty revenues climbed 8%.

"Revenue diversity protects the company from weak main cabin demand," said Tom Fitzgerald, an analyst at TD Cowen.

In recent years, airlines have focused on premium customers, who are less sensitive to inflation, to improve their margins.

For the quarter ending in September, Delta expects adjusted EPS of $1.50, plus or minus 25 cents, above the consensus of $1.31, according to LSEG data.

The company anticipates full-year adjusted EPS of between $5.25 and $6.25, also exceeding the consensus of $5.39.