ii view: why Delta remains confident despite oil price turbulence

Second-quarter results to 30 June  

• Adjusted revenue up 19% at $19.76 billion (£14.73 billion)
• Adjusted earnings down 26% to $1.56 per share
• Adjusted net debt down 17% to $13.6 billion

Guidance:

• Expects third-quarter revenues up by mid-teens percent
• Expects adjusted third-quarter earnings of $2-2.50 per share
• Reinstated a forecast from the start of the year for full-year earnings of $6.50-7.50 per share

Chief executive Ed Bastian said:

“Today, we reported our June quarter results, and it is clear that Delta’s brand and industry position are stronger than ever.

“Delta is executing from a position of strength, and we expect momentum to carry into the second half with double digit margins and a return to earnings growth.

"For the full year, we are affirming the guidance we set at the start of the year to grow earnings by 20 percent, overcoming a multi-billion dollar fuel headwind."

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ii round-up:

Delta Air Lines Inc (NYSE:DAL) today offered a confident outlook as management expressed hope that fare increases implemented following the Iran conflict will hold.

Travel during the football World Cup held in the US, Canada and Mexico helped second-quarter revenue climb 19% to $19.76 billion. Fuel costs up 77% year-over-year left adjusted earnings down 26% at $1.56 per share. Analysts had expected earnings of $1.48 per share.

The Atlanta headquartered airline forecasts earnings for the current third quarter to late September of between $2 and $2.50 per share. Wall Street had pencilled in around $2 per share.

Shares in the S&P 500 company fell 2% in US trading having come into these latest results up by just over a quarter so far in 2026. That’s ahead of 12% rises for European rivals International Consolidated Airlines Group SA (LSE:IAG) and Deutsche Lufthansa AG (XETRA:LHA). The S&P 500 index is up by around a tenth year-to-date.

Delta flies up to 5,500 peak-day flights to more than 300 destinations across six continents. The airline flagged continued robust passenger demand, with third-quarter revenue expected to rise year-over-year by a mid-teen percent.

Despite a three-quarters jump in fuel costs year-over-year to $3.93 per gallon, Delta’s own oil refinery operations helped reduce the leap by $0.11 cents per gallon.

Management also reinstated a start of the year forecast for full-year earnings of between $6.50 and $7.50 per share.

Expected free cashflow of up to $4 billion for 2026 helped group adjusted net debt drop by 17% year-over-year to $13.6 billion.

ii view:

Employing more than 100,000 people, Delta served over 200 million customers in 2025.  Domestic US flights generated its biggest slug of revenue last year 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, ongoing military action by both the US and Iran could once again escalate into a full-blown war, sending the price of oil rocketing again. Elevated inflation because of previously soaring energy prices may now cause interest rates to stay higher for longer, dampening future 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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On the upside, the group’s own oil refinery is assisting with elevated fuel prices. A diversity of revenue types and geographical locations continue to aid performance. A recovery in passenger numbers from the pandemic has improved cashflows, allowing a reduction in net debt and the payment of a dividend, while Delta’s fleet is being steered towards more fuel efficient and climate friendly aircraft.  

For now, and while the many risks associated with transport such as the weather should never be forgotten, a consensus analyst fair value estimate above $95 per share points to ongoing optimism on Wall Street for this generally well-managed American airline.

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