DAL's International Air Travel Demand in Good Shape: Sign for Growth?

Core Insights - Delta Air Lines (DAL) experienced significant impacts from last year's government shutdown, which led to multiple flight cancellations and affected revenue growth in Q4 2025 by approximately 2 percentage points. However, passenger revenues, which made up 80.7% of total revenues, increased year over year despite these challenges [1]. Group 1: International Travel Demand - International travel demand has rebounded strongly from COVID lows, with significant improvements in Q4 2025 driven by transatlantic and Pacific segments, offsetting domestic weaknesses. This resulted in a 5-point increase in unit revenue growth [2]. - The recovery in international air travel is underscored by DAL's announcement of the largest transatlantic season for summer 2026 to accommodate anticipated demand surges [3]. Group 2: Summer and Winter Schedules - For the upcoming summer, Delta plans to operate over 650 weekly flights to nearly 30 European destinations, including the introduction of seven non-stop routes to popular tourist destinations [4]. - Delta's winter schedule is also expected to attract significant traffic with services to major cities such as Amsterdam, Paris, Marrakech, London-Heathrow, Dublin, Athens, and Zürich [4]. Group 3: Competitive Landscape - United Airlines (UAL) is set to be the largest carrier across the Atlantic with services to over 45 cities planned for 2026, including four new cities in Croatia, Italy, Scotland, and Spain, aiming for nearly 3,000 weekly international round-trips [5]. - American Airlines (AAL) is expanding its European routes and adding services to South America for summer 2026, including new operations to Prague and tourist-friendly destinations like Athens, Milan, and Zürich [6]. Group 4: Financial Performance - Delta's shares have increased by over 21% in the past six months, outperforming the Zacks Transportation - Airline industry [7]. - The Zacks Consensus Estimate for DAL's earnings per share for the full years 2026 and 2027 has improved over the past 60 days, with current estimates at $7.22 for 2026 and $8.14 for 2027 [13][14]. Group 5: Valuation - From a valuation perspective, DAL trades at a 12-month forward price-to-sales ratio of 0.7X, which is higher than industry levels [11].