DAL 3Q25 - CEO sees, "significant improvement". Bull case $90. Bear case $40

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October 09, 2025

Delta Air Lines - Q3 Earnings: Premium Crushing It, 60% Industry Profits, Stock +5%

DELTA AIR LINES (DAL)

✈️🌍 Premium Airline Play | Making 60% of Industry Profits, Premium Crushing Economy, Stock Ripped +5%

Q3 2025 | Revenue $15.2B, Premium +9% vs Economy -4% (Record 13pt Gap), Corporate +8%, Market Validated The Thesis

💰 Market Cap: $39.2B | 🏢 Employees: 100,000+ | 📊 ROIC: 13% (5pts Above Cost/Cap)
👨‍💼 CEO Ed Bastian | 🎯 60% Industry Profit Share | 🏆 Leverage 2.4x (Down from 3.0x)
$60.10
📈 +$2.98 (+5.2%) Today | +$1.10 (+1.9%) YTD
Post-Earnings Price
Where Could This Go?

18-Month Price Targets (Stock at $60.10 Today)

$90.00
Bull Case (+50%)
Demand Surge
Margin Expansion
📊 Valuation Calculation:
• 2026E EPS: $8.00 × P/E: 11.3x = $90.00
🚀 Key Assumptions:
Corporate travel comes roaring back • Premium momentum gets even stronger • Economy seats keep improving • International finally rebounds • Airlines stay disciplined (no capacity wars) • Oil stays reasonable • Margins hit 14-15% • Free cash flow $5B+ • Amex hits that $10B target
$70.00
Base Case (+16%)
Steady Growth
Premium Strength
📊 Valuation Calculation:
• 2026E EPS: $6.80 × P/E: 10.3x = $70.00
⚖️ Key Assumptions:
Q3 momentum continues • Revenue grows 3-5% • Premium keeps crushing it • Corporate travel stays strong • Economy seats stay positive (big if) • Margins hold 11-12% • They keep controlling costs • Free cash flow $4B • They keep making 60% of industry profits
$40.00
Bear Case (-33%)
Demand Collapse
Recession Hits
📊 Valuation Calculation:
• 2026E EPS: $4.00 × P/E: 10.0x = $40.00
🔻 Key Assumptions:
Recession hits • Business travel tanks • Economy seats go negative again • Europe stays weak • Premium growth stalls • Oil spikes • Capacity wars break out • Price wars start • Margins fall to 7-8% • Government shutdown drags on
TL;DR - What You Need To Know
👑
They're Dominating
Making 60% of all airline profits. United makes most of the rest. Everyone else is fighting over scraps. Return on capital is 13% (5 points above cost - top half of S&P 500). The gap between winners and losers in airlines has never been bigger.
🎯
Premium Is The Play
Premium up 9%, economy down 4%. That 13-point gap is a record. Premium USED to lose money 10-15 years ago. Now it's their best business. 80%+ stick with it. Premium will be bigger than economy by early 2026. This is the whole strategy.
📈
Why Bulls Are Buying
Beat expectations. Q4 guidance strong. Corporate travel up 8% (Sept was 9%). Sales accelerating last 6 weeks everywhere. Amex heading to $8B this year then $10B. Card spend 2X market growth. Coastal cities crushing it. 90% of companies say travel staying same or up. Economy seats finally positive.
⚠️
What Could Wreck This
Europe down 7% (bad). Government shutdown. Poor people can't afford to fly. Maintenance costs elevated for years. Europeans visiting less. Cargo and MRO revenue lumpy. If another tariff scare or recession hits in spring, the economy seat comeback dies.

📊 Q3 2025 Results: Why The Stock Popped +5%

Delta crushed it. Revenue hit record $15.2B. The big story? Premium seats (+9%) absolutely destroyed regular seats (-4%). That's a record 13-point gap. Corporate travel is back (+8%). And here's the kicker: Delta expects to make 60% of ALL airline industry profits. Stock loved it.

✅
$1.71
Q3 EPS
Beat Expectations
💰
$15.2B
Q3 Revenue
+4.1% YoY Record
🏆
60%
Industry Profits
Delta's Share Expected
📈
13%
ROIC
5pts Above Cost/Cap

📞 Key Q3 2025 Earnings Highlights

🎊
Beat Expectations Across The Board
Q3 revenue: $15.2B (up 4.1%). Profit: $1.5B. They beat guidance. Free cash flow was $830M (now $2.8B year-to-date). Operating margin 11.2%. EPS $1.71. Basically, revenue is growing and they're printing cash. Momentum kept building all quarter long.
💎
The Premium Flywheel Is Real
Premium seats grew 9% while regular seats dropped 4%. That 13-point gap is a record. Here's why it matters: premium used to lose money. Now it's their highest-margin business. Customer retention is 80%+. Once people fly premium, they don't go back. Premium will overtake economy by Q1 or Q2 2026.
🏢
Business Travel Is Roaring Back
Corporate sales up 8% overall. But September? Up 9% (no CrowdStrike excuse). Big coastal cities like NYC, LA, Boston, Seattle seeing mid-teens growth. Their sales team is the best in the biz. 90% of companies surveyed say travel will stay same or increase in 2026. Pent-up demand still working through.
🔥
Delta vs Everyone Else
CEO said Delta will make 60% of the entire airline industry's profits. United probably makes most of the rest. Everyone else is struggling. The industry is splitting: quality airlines (Delta/United) are crushing it, budget carriers are barely surviving. Competition in Delta's airports is down. They're winning.

📍 What The CEO Said: Ed Bastian: "Delta's competitive advantages have never been more evident." Translation: they're dominating. He said Delta will make 60% of the entire industry's profits. That's insane. United will probably make most of the rest. Everyone else is fighting for scraps. They're paying employees $1B in profit sharing next February.

🎯 Sales Are Accelerating: Last 6 weeks have been strong across the board. Every region, every booking window. Economy seats finally turned positive (happened earlier than expected). The biggest improvements? Coastal cities like NYC, LA, Boston, Seattle - corporate travel up mid-teens there. Premium will probably overtake economy "in a quarter or two" in 2026.

🚀 The Credit Card Money Printer: American Express paid them $2B this quarter (up 12%). On track for $8B this year. Target is $10B "within the next few years." Card spending is growing 2X faster than other credit cards - and that's been going on for YEARS. Record number of people getting the premium cards. Only 1/3 of loyalty members have the card yet. Tons of room to grow.

🔮 What's Next: Q4 guidance: EPS $1.60-$1.90. Revenue up 2-4%. Full year hitting $6 EPS. Free cash flow $3.5-4B. Debt down $2B this year already. For 2026: looking at profitable growth, better margins (targeting mid-teens long-term), most new capacity will be premium seats. They're built to win.

🚀 Why DAL Bulls Are Right
🏆
They're Making 60% Of Industry Profits
CEO says Delta makes 60% of all airline profits. Return on capital is 13% (5 points above their cost - that's great). The gap between Delta and everyone else has never been bigger. Competition in their airports is DOWN. Bad airlines are cutting unprofitable flights. Delta is just winning.
💎
Premium Seats = Money Printer
Premium grew 9% while economy dropped 4%. Premium USED to lose money - now it's their best margin business. 80%+ of customers stick with premium once they try it. Think about your car - you don't downgrade. Premium will be bigger than economy by early 2026. This is a 10-15 year transformation paying off.
🎯
Credit Card = Annuity Stream
Amex paid them $2B this quarter (up 12%). Heading to $8B this year, targeting $10B soon. Card spending growing 2X faster than other cards - been doing this for YEARS. Only 1/3 of members have the card yet. This is high-margin recurring revenue that keeps growing.
💰
Balance Sheet Getting Stronger
Free cash flow $830M this quarter, $2.8B year-to-date. Paid down $2B in debt this year. Costs were flat (killed their target). They refinanced loans and saved money. Fitch upgraded their outlook. Tech efficiencies are "very early innings" - years of savings ahead. Fleet upgrades driving efficiency.
🐻 Why DAL Bears Have Valid Concerns
🌍
Europe Routes Got Smoked
Atlantic flights down 7% in Q3 - they admitted it was "disappointing." They held out for higher prices and it backfired. Strong dollar hurts - Europeans can't afford to visit as much (down 5-7% some markets). Safety and immigration concerns aren't helping. They need a better game plan for summer 2026.
😟
Lower-Income Travelers Struggling
Economy seats were down 4%. That 13-point premium gap looks good but partly because poor people can't afford to fly. Other airlines serving budget customers are going bankrupt. Economy JUST turned positive - could flip back negative. If recession hits, this whole thesis breaks.
🔧
Maintenance Costs Still High
Parts and labor inflation "still above normal." Supply chain is "multiyear" to fix - that's a long time. Turn times aren't back to 2017-19 levels. Material availability still sketchy. Heavy maintenance events are unpredictable year to year. These costs eat into margins and there's no quick fix.
⚠️
Lots Could Go Wrong
Government shutdown is ongoing (costing <$1M/day but who knows how long). Spring 2025 could see another demand "swoon" if tariff drama returns. Cargo revenue is choppy (flat in Q4). MRO was up 60% but that won't last. Competition could respond. Oil prices could spike. Recession would wreck this.

This analysis is for informational purposes only and should not be considered investment advice. Please consult with a financial advisor before making investment decisions.