What happened

Delta Air Lines (DAL -0.33%) resumed paying a dividend in June, ending a pandemic-related suspension, and provided an upbeat forecast. Investors took it to heart, sending shares of Delta up 30.9% in June, according to data provided by S&P Global Market Intelligence.

So what

The airline industry was hit hard by the pandemic, with COVID all but wiping out travel demand. The airlines responded by increasing borrowings, cutting costs, and -- in the case of Delta -- suspending its dividend to preserve cash.

A lot has gone right for the industry since, and ahead of its investor day in mid-June, Delta announced a significant milestone in its recovery. The airline declared a dividend of 10 cents per share, saying the resumption reflected progress on its three-year financial plan that has already seen about $10 billion in debt reduction.

The actual investor day presentation provided more momentum. Delta said it is on track to hit $6 in earnings per share, implying it could meet or even exceed Wall Street's $5.81 per share consensus estimate. The airline expects to earn more than $7 per share in 2024, generating free cash flow of more than $4 billion and a return on invested capital in the mid-teens.

Wall Street cheered the results. Morgan Stanley and Citigroup both named Delta as their top pick among U.S. airlines following the presentation, and about a half-dozen analysts raised their price target on the stock late in the month.

Now what

Delta has come a long way but remains a work in progress. The stock is well off its COVID-era lows, but it is still 20% below where it traded in January 2020. For all of the debt it has paid down, its levels are still above where they were pre-crisis.

CEO Ed Bastian sounded a cautious tone during the presentation, saying paying down debt will continue to be Delta's priority use for surplus capital. By the end of 2024, debt levels should be comparable to the pre-COVID years, but it is still likely to be two to three years before the airline will consider share repurchases.

There are other uncertainties to consider. While demand for air travel has remained strong this summer, there is still the risk that rising interest rates will trigger a recession that eats into travel. Aviation stocks have a long history of cyclicality and tend to perform very poorly during downturns.

Still, for those interested in adding an airline to their portfolio, it is hard to argue against Wall Street's conclusion that Delta is the best option. The airline was an industry innovator prior to the pandemic and appears to be recovering ahead of the competition.

There's still room for Delta shares to gain altitude from here.