Delta's American Express credit card helps boost airline's bottom line

Delta Air Lines’ partnership with credit card company American Express is proving to enhance the air carrier’s bottom line.

The U.S.’s second-biggest airline beat analysts’ expectations for its first-quarter earnings report on Thursday, largely due to cargo and passenger revenue. The airline reported adjusted earnings per share of $0.74, beating the Thomson Reuters estimate by a penny, and record revenues of $9.76 billion in the first three months of the year, the latter missing analysts’ expectations of $9.85 billion.

Delta and Amex's relationship also contributed to the airline's bottom line, as more than one million accounts were opened and $3 billion in revenue was generated last year. The air carrier reported a record number of accounts were opened in the first quarter of 2018 as well.

“I think the AmEx relationship, which has been growing at a double-digit clip, will continue to grow at a double-digit clip,” Delta President Glen Hauenstein said during an earnings call on Thursday.

​The joint credit card is part of Delta’s SkyMiles program and allows customers to earn one mile per every dollar for purchases made with the card, including everyday purchases like groceries, gasoline and phone bills.

“The idea that selling miles to American Express contributes upwards of 35% of Delta’s earnings and closer to 50% for American Airlines – I think that’s a really misunderstood and underreported part of this industry,” Stifel analyst Joseph DeNardi told FOX Business, regarding the significance of the partnership. “I think it’s one that deserves more attention … But I think that’s the most interesting aspect of this industry for investors.”

Ticker Security Last Change Change %
DAL DELTA AIR LINES INC. 31.60 -0.54 -1.68%
AXP AMERICAN EXPRESS CO. 159.77 -3.00 -1.84%

Still, Delta – and other U.S. carriers – has been dealing with rising oil prices, which has caused shares to fall over the past week. Brent crude futures jumped to the highest levels since December 2014 due to rising tensions in the Middle East, which could have a short-term impact on airline earnings.

“Oil prices will lead to lower earnings for airlines because they will struggle at least in the near term to offset higher fuel prices with higher fares,” DeNardi said. “Over time, I think that they will be able to offset some portion of the higher costs associated with higher fuel prices with higher fares.”