Delta Air Lines just capped its centennial year with record revenue, record free cash flow, and a fresh jet order, even as its CEO warns that the “bottom end” of the industry is “struggling greatly” and Wall Street remains on edge over tariffs and the fragile economics of budget flying.

America’s most profitable airline used its fourth quarter 2025 earnings call on Tuesday to argue that premium-seeking, high income travelers—and the loyalty ecosystem built around them—are insulating it from the turbulence battering lower cost rivals and jittery investors. CEO Ed Bastian also talked openly about the struggles elsewhere in the industry. “The bottom end of the industry on the commodity side of the business has been struggling greatly,” he told analysts on the earnings call. The economic woes of average Americans don’t seem to be hitting Delta’s profits, though.

Delta said it expects adjusted earnings per share to come in between $6.50 to $7.50 in 2026, versus $5.82 for 2025. Those are impressive numbers, and would be a record for Delta, but the airline guided to $6 per share in October 2025 and guided to more than $7.35 per share for 2025 before tariffs started to bite. Traders sent Delta shares down more than 3% because even another year of high profits aren’t matching the Atlanta flagship carrier’s pre-tariff guidance.

Record year at 30,000 feet

Delta reported record full year revenue of $58.3 billion in 2025, up 2.3% year over year, with a 10% operating margin and $5 billion in pre tax income, cementing its status as the U.S. industry’s profit leader. Free cash flow hit $4.6 billion, the highest in Delta’s history, helping the carrier cut leverage by more than half over three years and leaving it with what executives called the strongest balance sheet and credit quality it has ever had.

In the December quarter, Delta generated $14.6 billion in revenue—also a record—while delivering a 10% operating margin and earnings of $1.55 per share, modestly above expectations despite a revenue miss and disruption from a government shutdown and FAA mandated flight reductions. The company is guiding investors to 20% earnings per share growth in 2026, with $3 billion–$4 billion of free cash flow and about 3% capacity growth, all concentrated in higher margin premium cabins.

Bastian and his executive team were explicit that the engine behind those results is Delta’s premium customer base and an increasingly sophisticated merchandising model that charges more for better seats and flexibility. President Glen Hauenstein, who is retiring next month after two decades shaping the airline’s commercial strategy, said premium revenue grew 7% in 2025 and that diversified, higher margin lines—premium, loyalty, cargo, maintenance, and travel products—now account for 60% of total revenue.

Delta’s partnership with American Express remains central to this high end tilt, with co brand remuneration up 11% to 8.2 billion dollars last year on the back of more than 1 million new card acquisitions and double digit spend growth every quarter. Roughly one third of active SkyMiles members now carry a Delta Amex card, and the airline expects high single digit growth in co brand remuneration in 2026 as it pushes toward a $10 billion target within a few years. Hauenstein said Delta sees “significant runway ahead as member engagement and penetration continues to rise.” (Like Delta, American Express has released a string of blowout earnings, driven by increasing spending from the same cohort of affluent Americans willing to spend.)

‘Bottom end’ of industry under pressure

For all the celebration, Bastian used some of his sharpest language yet about the divide opening up within U.S. aviation between premium heavy network carriers and budget airlines that rely on rock bottom fares. Citing the collapse or restructuring of several low cost players and the stalled growth of ultra low cost carriers, he noted consolidation in the industry earlier this week, with Allegiant and Sun Country announcing a $1.5 billion merger. He said Delta was “waiting to see what happens with Spirit” as the low-cost carrier navigates bankruptcy.

“That sector has been unable to grow here for the last several years,” he concluded, “and when that sector is not growing, it can’t contain its CASM [cost per available seat mile]. Its CASM goes up significantly every quarter, more than ours. And so that’s become a real challenge for that sector in the industry.” In other words, the only game in town for airline profits is more spending by high earners, and it’s fortunate that Delta is poised to capitalize on this amid what economists widely call a “K-shaped economy,” with the affluent thriving and the poor suffering in opposite directions.

Bastian predicted “further rationalization” among carriers that are not earning their cost of capital, saying it could come via consolidation, liquidation, or internal restructurings as investors lose patience with business models built on cheap seats that no longer cover costs. Hauenstein argued that 2025 showed just how wide the gap has become, saying Delta likely captured a higher share of total U.S. airline profits than ever before as competitors were “very challenged.”

To this point, Delta’s own Main Cabin customers—who skew more price sensitive—remain a weak spot in an otherwise glossy story. Bastian acknowledged that, while revenue trends have sharply accelerated into early 2026 and booking records were set last week, “we have not really seen Main Cabin move yet,” adding that hitting the top of the company’s guidance range “would definitely be the Main Cabin starting to move.”

That hesitancy comes amid Trump era tariffs that rattled markets and travel demand in 2025. Bastian described a year of volatility that delayed what he still sees as an eventual reset in how the bottom tier of the industry is priced. He cautioned that, even with a strong start to the year and corporate clients signaling more travel, Delta must “have a bit of caution” in its outlook after 2025 was knocked off course by policy shocks and economic jitters.

All new seat growth this year will be in premium cabins, and executives touted further gains from “merchandising” tools that slice each product into basic, main, and extra tiers, letting customers pay more for perks like earlier seat assignments or refunds. Hauenstein said those retailing initiatives represent “multibillion dollar opportunities” in the coming years, promising more revenue from the same travelers even if Main Cabin demand remains slow to catch up.

For this story, Fortune journalists used generative AI as a research tool. An editor verified the accuracy of the information before publishing.