Atlanta-based Delta Air Lines (NYSE: DAL – $60.27) reported a 39.3% rise in quarterly profit as the second-largest U.S. carrier benefited from higher fares and flying fuller planes. On an adjusted basis, the airline earned $2.35 per share for the quarter compared to $1.77 in the second period of 2018. Analysts on average expected a profit of $2.28 per share. Total operating revenue rose 6.5% to $12.54 billion, also higher than most Street views. Domestic revenue climbed 8.8% to nearly $8.1 billion, and free cash flow totaled $1.8 billion. The company also raised its full-year profit forecast to between $6.75 and $7.25 per share from a previous range of $6 to $7 and brackets analysts’ consensus of $6.98. Supply constraint due to the extended grounding of the Boeing 737 MAX planes is expected to help U.S. airlines that do not have the jet in their fleet, including Delta. The MAX grounding had a “marginal benefit” on second-quarter results, but management attributed the real growth driver to demand strength and higher premium ticket prices.
Delta also increased its quarterly dividend by 15% and the payout will jump to $0.4025 per share up from $0.35 and yield 2.7% at current levels. These shares continue to look good for the long haul. Delta’s best-in-class operational reliability, strong loyalty program, favorable brand perception, efficient fleet and expanding maintenance unit should keep the shares trading at a premium to rivals. Delta, committed to returning 70% of free cash flow to shareholders annually, can remain a holding in aggressive accounts willing to participate in the volatile airline business.