10 Reasons to Buy and Hold This Market-Leading Stock Forever

If you’re open to a different perspective, even one that contradicts traditional wisdom about airline stocks, consider investing in Delta Air Lines (DAL). Here are ten compelling reasons why this might be a wise choice.

1. Growth in premium revenue

In simpler terms, the typical pattern seen in the airline business is one of frequent ups and downs, with good times causing oversupply, which results in fierce competition when it comes to the prices of regular tickets during a natural decrease in demand. Delta Airways aims to reduce these industry fluctuations by increasing its revenue from premium cabins, as high-income travelers make up about three-quarters of all air travel spending.

To clarify, while only around 10% of the seats were premium in 2010, this percentage has grown significantly to 30%. Moreover, Delta anticipates that revenue generated from the premium cabins will eventually exceed that of the main cabin by 2027.

2. SkyMiles loyalty program

Delta fosters lasting customer devotion by excelling in its SkyMiles rewards system, experiencing a 50% surge in membership between 2017 and 2024. The loyalty program encourages members to invest more with Delta, creating enduring value for the airline. Furthermore, this approach allows Delta to venture beyond the conventional airline business model, which centers on individual ticket transactions.

3. Co-brand credit cards with American Express

American Express buys airline miles from Delta, which they later offer as rewards for spending on their credit cards. This strategy has been very profitable, and the amount American Express pays Delta for these miles has increased significantly, from $2 billion in 2010 to a projected $7 billion in 2024. Delta aims to eventually receive $10 billion through this arrangement, demonstrating their ongoing effort to expand their income sources. This is yet another instance of Delta broadening its income channels.

4. A new discipline

In the past, airlines, including myself, haven’t always been proactive about trimming capacity when the industry takes a downturn. This lack of discipline has often resulted in brutal profit margin losses. Yet, I’m excited to share that for two consecutive years, my airline, Delta, has made adjustments to its capacity—reducing it during the summer of 2024 due to overcapacity issues and decreasing demand, and again in the spring of 2025 as a response to tariffs slowing down demand. This strategic move is fantastic news for our cost and earnings management!

5. The industry is also more disciplined

Besides this, the broader industry is also becoming more disciplined, with companies such as United Airlines scaling back their operations due to the slowdown caused by tariffs in 2025. During a recent earnings call, Delta’s CEO Ed Bastian commented, “On the supply side, we are optimistic about the actions taken by the industry to match capacity with demand as we move past the busy summer season. Notably, there will be a reduction in seats at the lower end of the market.

6. Impressive return on investment

As an aviation enthusiast, I can’t help but share my excitement about Delta’s ambitious plans! They’re aiming high, setting their sights on generating a Return on Invested Capital (ROIC) of 13% by 2024, which is higher than their Weighted Average Cost of Capital (WACC) of 8%. And that’s not all, they have a long-term goal to push this ROIC up to a staggering 15%. This is quite remarkable given the historical challenges faced by the airline industry in consistently meeting this metric. It’s clear that Delta is leading the charge and setting new standards for profitability within our industry.

7. Market position

Delta is doing well in terms of Return on Invested Capital (ROIC) primarily due to its advantageous market position. This advantage is attributed to factors like premium services, SkyMiles program, among others. Furthermore, Delta’s robust domestic network, with key hubs in Atlanta, Minneapolis/St. Paul, and Salt Lake City, contributes significantly to its success. Additionally, it maintains a strong international presence at London-Heathrow, Paris-Charles de Gaulle, and Amsterdam airports.

8. Structurally advantaged

In the context of escalating airport expenses, high-tier carriers like Delta benefit structurally more than their low-cost counterparts due to the higher pricing tiers they offer. An incremental $10 in costs related to labor, supply chain, and airport fees might seem minimal on a ticket price of $250 for Delta, but it significantly impacts the lower $70 ticket prices of budget airlines.

9. Robust cash flow generation

Indeed, Delta has accumulated debt due to the extended lockdown periods caused by COVID-19, yet by the end of June, its adjusted debt had decreased from $21.4 billion at the end of 2023 to $16.3 billion. What’s more, with their robust free cash flow (FCF) generation – as they’ve just confirmed guidance for full-year 2025 FCF between $3 billion and $4 billion – Delta is expected to further reduce its debt, enhancing the overall health of its financial position.

10. Valuation

In essence, despite valuation changes, it’s wise to keep Delta’s stocks for a long-term investment, given its current pricing. The stock is trading slightly above 10 times projected 2025 earnings and 12.2 times the lower boundary of the predicted 2025 Free Cash Flow (FCF) range. This suggests that the market is underestimating Delta’s future growth potential, making it a very appealing investment at these prices.

2025-07-19 11:24