Key facts
- Delta Air Lines reaffirmed its full-year profit forecast and provided a stronger-than-expected third-quarter outlook.
- The airline expects continued revenue strength driven by pricing, not capacity expansion.
- Delta's second-quarter adjusted earnings fell 26% to $1.56 per share, topping analyst expectations.
- The carrier absorbed its highest quarterly fuel expense in history, up $1.9 billion year-over-year.
- Delta expects third-quarter adjusted earnings between $2.00 and $2.50 per share.
Delta Air Lines reaffirmed its full-year profit forecast and provided a stronger-than-expected third-quarter outlook, signaling confidence that recent fare gains can hold even as fuel prices ease from their highs. The airline's results offer an early indication of whether carriers can preserve fare increases implemented during the spring fuel surge as costs moderate.
Chief Financial Officer Erik Snell stated that Delta recovered approximately 60% of its fuel cost increase in the second quarter, a faster pace than historically, and anticipates recovering more in the current quarter. He noted that demand remains strong with no signs of weakness. Airlines had raised fares in the spring due to a surge in jet fuel prices linked to the Iran conflict. While fuel prices have since retreated from their peak, investors are monitoring whether lower costs will boost profits or if carriers will increase capacity after the summer, potentially weakening pricing.
Delta forecast 2026 adjusted earnings between $6.50 and $7.50 per share, maintaining the range initially issued in January. The midpoint of this forecast is about 17% higher than the $5.97 per share expected by analysts. Snell indicated that fuel price volatility would be a key factor in reaching the upper end of this range, while revenue strength is expected to continue through year-end. For the third quarter, Delta projects adjusted earnings of $2.00 to $2.50 per share, exceeding the average analyst estimate of $2.02. The company anticipates mid-teen revenue growth and an operating margin of 11% to 13%.
The airline reported a nearly 14% revenue increase in the second quarter with only about 1% capacity growth. Passenger revenue per available seat mile rose 11% year-over-year. Snell indicated that Delta's third-quarter volume would be flat to slightly higher, suggesting revenue growth is primarily driven by fares and passenger mix rather than increased flight volume. Premium revenue increased by 17%, and main-cabin ticket revenue also grew by 8%, indicating robust demand across customer segments.
Analysts suggest that the post-Labor Day period will be a more significant test for airlines, as leisure travel typically softens. They caution that fourth-quarter capacity plans pose the greatest risk to current fare strength, as a sudden increase in flying could undermine pricing gains. Snell stated that Delta can adjust its flight schedules on short notice if demand deteriorates, similar to its actions in the second quarter.
Delta's second-quarter adjusted earnings fell 26% to $1.56 per share from a year earlier, though this still surpassed analysts' expectations of $1.48. The airline absorbed its highest quarterly fuel expense in history, which was $1.9 billion higher than the previous year. Delta's fuel bill is projected to be approximately $4 billion higher this year. For the third quarter, the airline is assuming a fuel price of about $3.15 per gallon. U.S. spot jet fuel has recently climbed above $3 per gallon, the first time since mid-June, due to renewed tensions between the U.S. and Iran, but prices remain significantly below the early April peak of around $4.88 per gallon.