ii view: fuel costs force Delta Air Lines to rethink growth plans

First-quarter results to 31 March  

• Revenue up 13% at $15.85 billion
• Adjusted earnings up 44% to $0.64 per share
• Pre-tax profit up 44% to $532 million
• Adjusted net debt down 20% to $13.54 billion

Guidance: 

• Expects second-quarter revenues to be up low teens percent
• Expects second-quarter pre-tax profit of around $1 billion
• Flags a more than $2 billion increase in forward fuel costs

Chief executive Ed Bastian said:

"Delta’s results underscore the power of our brand and the durability of our financial foundation. 

“Demand remains strong, and we are taking actions to protect our margins and cash flow. This includes meaningfully reducing capacity growth, with a downward bias until the fuel environment improves, and moving quickly to recapture higher fuel costs.”

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ii round-up:

Delta Air Lines Inc (NYSE:DAL) today announced a slowing in capacity growth plans as it battled soaring jet fuel costs and potentially reduced passenger demand as customer travel costs increase. 

Additional future fuel costs of more than $2 billion now see the Atlanta headquartered carrier increase passenger baggage check-in costs by around $10 an item. A 13% rise in first-quarter revenue to $15.85 billion helped push adjusted earnings up 44% to $0.64 per share. Wall Street had forecast earnings of $0.57 per share. 

Against the backdrop of a two-week ceasefire in the Middle East, Delta shares soared 10% in early US trading as the oil price plunged almost 15% to around $93 a barrel. Delta shares came into these latest results down 6% so far in 2026 compared with British Airways owner International Consolidated Airlines Group SA (LSE:IAG), down 13% before the ceasefire announcement. 

Delta operates its own oil refinery, reducing the cost of jet fuel. Despite rising fuel costs, profits for the current second quarter to late June are still expected to come in at around $1 billion, with the refinery offering a $300 million cost benefit. 

Delta flies up to 5,500 peak-day flights to more than 300 destinations across six continents. Management flagged continued robust passenger demand, with current second quarter revenue expected to rise year-over-year by a low teen percentage.

Group adjusted net debt as of late March of $13.54 billion was down a fifth year-over-year, below its pre-pandemic 2019 level.  

Second-quarter results are likely to be announced mid-to-late July. 

ii view:

Delta served more than 200 million customers in 2025. With a history dating back to 1928, the airline today employs more than 100,000 people. Domestic US flights generated its biggest slug of revenue in 2025 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, war could resume after the two-week ceasefire, with oil prices then potentially rising again. Higher inflation because of soaring energy prices may now cause interest rates to stay higher for longer, dampening economic activity and reducing travel demand. A forecast price/earnings (PE) ratio above the three-year average may suggest the shares are not obviously cheap, while airline industry emissions and climate change considerations have not gone away. 

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More favourably, the group’s own oil refinery is assisting with elevated fuel prices. A diversity of revenue types and geographical locations continues to aid performance. A recovery in passenger numbers from the pandemic has improved cashflows, allowing a reduction of net debt and the payment of a dividend, while Delta’s fleet is moving toward more fuel efficient and climate friendly aircraft.  

In all, and while the many risks outside of management’s control such as the weather raise risks across the transport sector, a consensus analyst fair value estimate above $75 per share suggests ongoing optimism on Wall Street. 

Positives: 

• Diversity of geographical locations
• High focus on costs

Negatives:

• Heightened geopolitical tensions 
• Many factors outside of management control

The average rating of stock market analysts:

Buy