American Express and Delta Air Lines extended their credit card partnership through 2029, the companies jointly announced Tuesday, a significant extension of one of the larger financial partnerships between a major U.S. airline and a credit card company.
Separately, Delta raised its forecast of first-quarter profit, citing higher demand from business travelers. Delta shares rose and helped lift other airline stocks in afternoon trading.
American Express will pay Delta more per year for the partnership, up to nearly $7 billion annually by 2023 from $3.4 billion paid in 2018.
Joseph DeNardi, an airline analyst for Stifel, said the announcement was sooner than anticipated "and the improvement in revenue and economics are significantly better than we were expecting."
DeNardi said the deal's long duration makes it more likely that Warren Buffett's Berkshire Hathaway will buy Delta. Berkshire Hathaway is Delta's biggest shareholder. It recently increased its stake to 10.4%, and those shares were worth $3.7 billion at Delta's stock price on Tuesday afternoon.
The possibility of Buffett buying an airline has been the subject of much speculation in recent months, with most of the attention focused on Delta and Southwest.
American Express and Delta previously extended their partnership in 2014 for five years, at a time when AmEx was still recovering from the loss of its partnership with Costco. AmEx has partnered with Delta since 1996, and it's considered one of AmEx's more valued co-brand partnerships.
The partnership means AmEx will continue to exclusively issue Delta credit cards. Certain AmEx card members will get access to Delta's network of airport lounges and be able to transfer points from AmEx's Membership Rewards program to Delta's SkyMiles program.
Despite the increased payout to Delta, AmEx said the extension of its partnership with the airline remains economically attractive. AmEx reaffirmed its previous 2019 earnings guidance, saying it expects to make $7.85 to $8.35 a share this year.
Also Tuesday, Delta reported traffic figures for March and raised its forecast of first-quarter earnings to between 85 cents and 95 cents per share, up from 70 cents to 90 cents per share. Analysts were expecting 81 cents per share, according to a survey by FactSet.
The Atlanta company pointed to better terms of the AmEx deal and said that a key measure, revenue for every seat flown one mile, rose more than expected in the just-ended quarter, mostly due to strong corporate-travel demand.
Shares of Delta Air Lines Inc. gained $3.15, or 6%, to $55.33. Shares of the next five largest U.S. airlines rose by smaller percentages.
Shares of American Express fell 0.6% to $111. Berkshire Hathaway is also the biggest shareholder in AmEx.
Koenig reported from Dallas.