What happened

Shares of Delta Air Lines (NYSE:DAL) were up 10.2% in June, according to data provided by S&P Global Market Intelligence, spurred by a steady stream of favorable headlines and growing investor confidence that consumer demand was holding up well.

So what

Delta kicked off the month by reporting that revenue per available seat mile climbed 7% in May, with the airline filling a higher percentage of its seats compared with a year prior, despite growing capacity by 5.3%. Early in the year, a combination of the threat of trade wars and fears of a slowing economy had investors nervous that airlines would have trouble selling tickets in 2019. But so far, those concerns have proven unfounded.

A Delta A321 at the airport.

Delta had a good trip in June. Image source: Delta Air Lines.

Investors in Delta and other airlines received a fresh indication that demand was holding up well when the industry pushed through a new round of domestic fare increases in the middle of the month. While airlines are forbidden from colluding on pricing, they do monitor one another's fare structures closely and try to match rates. For this reason, an attempt by one airline to raise fares often succeeds or fails based on whether competitors choose to match the price.

Delta also took a 4.3% stake in the parent of Korean Air Lines in June, solidifying its alliance with an important Asian partner. Delta has been a leader in the U.S. in investing in international airlines, owning 49% of Virgin Atlantic and a similar share of Grupo Aeromexico, as well as investing in China Eastern Airlines.

Now what

Shares of Delta are up 16% year to date, outpacing rivals Southwest, United, and American. But the stock still trades at a discount to those other airlines: 9.8 times earnings, versus Southwest (12.26 times earnings), United (10.8), and American (10.6).

Delta kicked off this month by raising second-quarter guidance, saying it now expects earnings in a range of $2.25 to $2.35 per share, compared with expectations for $2.19, at an adjusted pre-tax margin of 15% to 16%, compared with 14% last year.

The airline business is finicky, tied to consumer demand, the health of the economy, and oil prices. But if conditions remain favorable, there is no reason this best-in-class operator can't fly higher still.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.