Delta lifts profit forecast thanks to strong demand and premium tickets

Delta Air Lines on Tuesday raised its second-quarter forecast and estimated full-year adjusted earnings of $6 a share, at the high end of estimates it gave last April as strong travel demand and trade-ups to more expensive fare classes continue to drive growth.

Delta forecast adjusted earnings per share of $2.25 to $2.50 for the second quarter, up from a previous range of $2 to $2.25 a share. CEO Ed Bastian said that the company’s second-quarter earnings, which it will report next month, could be its highest ever for the April-June period.

In a presentation ahead of its investor day later Tuesday, the airline also raised its estimate for free cash generation this year to $3 billion from $2 billion. Delta reinstated its quarterly dividend earlier this month.

“The demand as you know, as anyone that’s traveling knows, is off the chain,” Delta CEO Ed Bastian said in an interview with CNBC’s “Squawk Box.”

Delta and its rivals have reported strong travel demand, particularly for international trips, while other sectors have struggled as consumers grapple with inflation and other challenges. The airline industry has also faced growth constraints because of air traffic controller shortages, delays in new aircraft and shortfalls of new pilots, helping keep fares firm.

But in addition to resilient demand, airlines are enjoying jet-fuel prices that are down about 30% from a year ago.

Delta forecast revenue per available seat mile, a gauge of how much money an airline is generating for how much its flying, to be up as much as 18% over last year, an increase from a previous forecast of 15% to 17% growth.

Delta shares were up more than 2% in premarket trading Tuesday.