Shares of Delta Air Lines (DAL 0.43%) surged 12% last week, after the company boosted its first-quarter earnings forecast and announced a long-term extension of its credit card partnership with American Express (AXP 2.56%).

On Wednesday, Delta will kick off earnings season for the airline industry, reporting its full results for the first quarter. In addition to reporting solid growth in earnings per share for the first quarter, Delta is likely to publish a favorable outlook for the second quarter and beyond.

The Q1 outlook has improved

Three months ago, Delta Air Lines projected that it would post EPS between $0.70 and $0.90 for the first quarter, versus $0.74 a year ago. Investors were particularly disappointed by the airline's forecast that revenue per available seat mile (RASM) would rise just 0% to 2% year over year in the quarter. Delta had achieved a 3.2% RASM gain in the fourth quarter and a 4.3% increase for 2018 as a whole.

However, Delta was facing several one-off headwinds last quarter. The timing of Easter and the timing of joint venture profit-sharing settlements reduced RASM by about 1 percentage point in the first quarter. As of mid-January, Delta also anticipated $25 million per month in lost revenue from the government shutdown (which ended later that month).

Last week, Delta revealed that Q1 RASM will come in near the high end of its guidance range, rising about 2%. That includes a roughly 1 percentage point benefit from the renewal of Delta's long-standing partnership with American Express.

A Delta Air Lines plane taking off

Delta boosted its Q1 earnings forecast last week. Image source: Delta Air Lines.

Delta Air Lines also expects nonfuel unit-cost growth to come in lower than previously expected for the first quarter, offsetting the uptick in fuel prices over the past three months. As a result, the company raised its Q1 EPS forecast to a range of $0.85 to $0.95. Even the bottom of that new range implies solid double-digit EPS growth.

Profit growth may accelerate in Q2

Given that Delta has already given investors a pretty good idea of its first-quarter performance, its guidance for the second quarter will be of particular interest in this week's report.

There's a good chance that Delta will project even faster EPS growth for the second quarter. The timing of Easter will boost unit revenue in the coming quarter, while the government shutdown ended long ago. It's also unlikely that Delta will face another negative impact related to the timing of joint venture settlements.

One key question is whether the RASM tailwind from the new American Express agreement will continue throughout 2019. There's a good chance that it will. Recent renewals of airlines' credit card deals have come with enhanced economics, as airline loyalty points have become a highly desirable rewards currency for credit card companies. Given that Delta expects revenue from its American Express partnership to more than double to $7 billion by 2023, it seems likely that the airline extracted better terms from American Express for 2019 and beyond.

More upside ahead

Back in December, Delta projected that EPS would rise to between $6 and $7 in 2019, versus $5.65 a year ago. Depending on the terms of the new American Express agreement and Delta's outlook for the second quarter, it's possible that the company could raise that guidance range on Wednesday.

Even if it doesn't, Delta shareholders should be optimistic. The airline is still relatively early in a program to slash costs by $1 billion annually. The company also plans to upgrade a substantial proportion of its fleet over the next three years, which will improve its fuel efficiency while also reducing its nonfuel unit costs.

Meanwhile, the rollout of new products like Premium Select -- a true premium economy cabin for long-haul flights -- and the growth of its lucrative partnership with American Express will help Delta continue driving RASM gains.

Barring a sharp slowdown in global economic growth or a big spike in oil prices, this should enable the airline to post strong EPS growth over the next few years. With Delta Air Lines stock trading for less than nine times the midpoint of the company's 2019 EPS guidance range, it looks like there's plenty of room for the shares to keep rising.