ii view: Delta Air Lines bounces back from profit downgrade

Third-quarter results to 30 September  

• Adjusted revenue up 16% to $17.59 billion
• Adjusted earnings up 1% to $1.72 per share
• Adjusted net debt down 14% to $13.35 billion

Guidance:

• Now expects full-year earnings of between $5.10 and $5.60 per share, down from a previous $6.50-7.50 per share

ii round-up:

Delta Air Lines Inc (NYSE:DAL) last week downgraded its full-year profit forecast as war in the Middle East continues to keep fuel costs high.

The Atlanta headquartered airline now expects full-year adjusted earnings of between $5.10 and $5.60 per share, down from a previous $6.50-7.50 range. An expected $6 billion increase from last year means the annual fuel bill for 2026 will be 60% higher than in 2025.

Shares in the S&P 500 company fell 4% in post results US trading having come into these latest numbers up by around a fifth so far in 2026. However, they have since recovered all the lost ground. British Airways owner International Consolidated Airlines Group SA (XMAD:IAG) is little changed this year. The S&P 500 index has gained 14% year-to-date.

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Adjusted revenue for the third quarter to late September rose 16% to $17.59 billion as Delta was able to pass on much of the fuel cost increase to customers via higher fares.

Delta says it serves the top 40% of the US population in wealth terms, which it estimates are nearly $40 trillion richer than just a few years ago, enabling a higher prioritisation of travel experiences.

Adjusted earnings for the third quarter rose 1% to $1.72 per share, with expected full-year pre-tax profit of around $4.5 billion little changed from 2025.

As well as operating up to 5,500 peak-day flights to more than 300 destinations, Delta also owns oil refinery operations, helping it to marginally reduce fuel costs.

Group adjusted net debt fell 14% to $13.35 billion. Accompanying management comments highlighted ongoing revenue strength into the fourth quarter, with revenues for the full year expected to be up around 20%.

ii view:

Delta employs around 100,000 people, serving over 200 million customers in 2025. Domestic US flights made most revenues at 70%. That was followed by Atlantic flights at 17%, flights to Latin America at 7% and those to the Pacific region the balance of 5%.  

For investors, elevated fuel prices and subsequently higher inflation could yet see more interest rate rises, potentially dampening demand. A forecasts price/earnings (PE) ratio above the three-year average may suggest the shares are not obviously cheap. Airline industry emissions and concerns about climate change have not gone away, while a prospective dividend yield of around 1% is less than rivals IAG and Deutsche Lufthansa AG (XETRA:LHA).  

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More favourably, a focus on wealthier customers filling premium and business class seats continues to aid increases in required passenger fares to offset higher fuel costs. The group’s own oil refinery does help reduce fuel costs marginally. A diversity of revenue types and geographical locations persists, while Delta’s own fleet is being pushed towards more fuel efficient and climate friendly aircraft.  

In all, the many risks associated with airlines such as the weather and air traffic control strikes can never be forgotten. That said, a consensus analyst estimate of fair value above $101 appears to point to ongoing optimism on Wall Street for this generally well-managed American airline.

Positives:

Diversity of geographical locations

Own oil refinery operations

Negatives:

Heightened geopolitical tensions

Many factors outside of management control

The average rating of stock market analysts:

Buy