Delta Air Lines, Inc. (Ticker: DAL)

1. The Business Model (How They Make Money)

Delta Air Lines primarily makes money by transporting people and cargo across its extensive global network. Their core business revolves around selling tickets for flights, which includes various service levels from economy to premium cabins. Beyond just ticket sales, Delta has diversified its revenue streams to enhance its financial stability.

Their main revenue streams for the full year 2025 were:

• Airline Operations: This is Delta's largest segment, generating $58.29 billion in revenue, which accounted for approximately 91.99% of their total revenue. This includes income from passenger travel and cargo services.
• Refinery Operations: Delta owns and operates a refinery in Trainer, Pennsylvania, which helps manage its fuel costs. This segment contributed $6.96 billion in revenue in 2025, representing about 10.99% of their total revenue.
• Loyalty Program (SkyMiles) and American Express Partnership: A significant portion of Delta's revenue comes from its SkyMiles loyalty program, particularly through its partnership with American Express. In 2025, the remuneration received from American Express totaled $8.2 billion. This loyalty revenue continued to show strong growth, increasing by 13% in the first quarter of 2026, with American Express remuneration exceeding $2 billion in that quarter.
• Maintenance, Repair, and Overhaul (MRO) Services: Delta also provides aircraft maintenance and engineering support services to other airlines. This MRO revenue increased by more than $200 million year-over-year in the first quarter of 2026.

2. The Metrics That Matter Most

For Delta Air Lines, these are the most important financial pulses to check:

• Revenue: This metric represents the total amount of money Delta brings in from all its services, including flight tickets, cargo, refinery sales, and loyalty programs. It's the most straightforward measure of how much business the company is doing. Consistent growth in revenue indicates that more customers are choosing Delta and that its diversified business ventures are performing well. For the full year 2025, Delta reported total operating revenue of $63.4 billion. In the first quarter of 2026, their total operating revenue was $15.9 billion, marking a 13% increase compared to the previous year.

• Operating Income: This figure shows the profit Delta makes from its core business activities before accounting for interest payments on debt or taxes. It's a key indicator of how efficiently the airline is running its operations, including managing costs related to flights, fuel, and employee salaries across its airline, refinery, and MRO segments. A healthy operating income suggests effective cost management and strong operational performance. Delta's operating income for the full year 2025 was $5.8 billion. In the first quarter of 2026, their operating income was $501 million.

• Operating Cash Flow: This metric reveals the actual cash Delta generates from its day-to-day business operations, such as selling tickets and providing services. It's crucial because cash is essential for paying bills, investing in new aircraft, and reducing debt. A strong operating cash flow indicates that the company has sufficient liquid funds from its core business to sustain itself and grow without excessive reliance on external financing. Delta generated $8.3 billion in operating cash flow for the full year 2025. For the first quarter of 2026, their operating cash flow was $2.4 billion.

• Debt to Equity: This ratio compares the total amount of money Delta has borrowed (debt) to the money invested by its owners (equity). Airlines are typically very capital-intensive businesses, requiring significant investment in aircraft and infrastructure, which often leads to substantial debt. A lower debt-to-equity ratio generally indicates that the company is less financially risky because it relies less on borrowed money to fund its operations and assets. At the end of 2025, Delta's total debt and finance lease obligations were $14.1 billion. This metric is vital for assessing the company's financial leverage and its capacity to manage its financial commitments.

3. How to Value This Company

The ONE most relevant valuation metric for Delta Air Lines is EV/EBITDA.

Here's a simple explanation of why this metric is the best way to figure out if Delta's stock is cheap or expensive:

• What it is: EV/EBITDA stands for "Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization."

  • Enterprise Value (EV) is like the total price tag if you wanted to buy the entire company, not just its stock. It includes the value of all its outstanding stock, plus its total debt, minus any cash it has on hand. This gives a more complete picture of a company's worth, especially for businesses that carry a lot of debt.
  • EBITDA is a measure of a company's operating profit that focuses on the cash generated from its core business before accounting for things like interest payments, taxes, and the accounting cost of assets wearing out (depreciation and amortization). For an airline, depreciation on its large fleet of aircraft is a significant non-cash expense.

• Why it's best for Delta: Airlines like Delta are "capital-intensive," meaning they need to spend a lot of money on big assets like airplanes. They also often take on a good amount of debt to pay for these assets.

  • Using EV/EBITDA helps us compare Delta to other airlines or similar businesses more fairly. It looks at the company's overall value (EV) in relation to its ability to generate cash from its main operations (EBITDA). By stripping out interest, taxes, and depreciation, it removes the impact of different ways companies are financed and the accounting rules for their assets.
  • For a beginner, you can think of this metric as telling you how many "years of operating profit" (EBITDA) it would theoretically take to buy the entire company (EV). A lower EV/EBITDA ratio might suggest that the company is a better value compared to how much cash it generates from its core business.