CHICAGO--Delta Air Lines sought to reassure investors on Friday that fare gains pushed through during this year's fuel shock can hold even as fuel costs moderate, after the carrier reaffirmed its full-year profit forecast and gave a stronger-than-expected third-quarter outlook.
The forecast from the first major U.S. carrier to report results offers an early read on travel demand beyond the summer season and it focuses on whether airlines can preserve higher fares as fuel costs ease from this year's highs.
The Atlanta-based carrier, however, warned that fuel-price volatility remained a major risk even as it expected revenue strength to continue through year-end. Shares of Delta and other major U.S. airlines fell as investors weighed bullish demand commentary against renewed fuel-price risk. Delta shares were down 2% in midday trade, while United Airlines, American Airlines and Southwest Airlines were down between about 1% and 2%.
Savanthi Syth, a Raymond James analyst, said Delta's 2026 forecast was based on last week's fuel forward curve, before the latest escalation in the U.S.-Iran conflict pushed the Brent forward curve higher. U.S. spot jet fuel has climbed to $3.10 a gallon, moving back above the $3 mark for the first time since mid-June amid renewed hostilities between the U.S. and Iran. Prices remain well below an early-April peak of roughly $4.88 a gallon.
Delta expects its fuel bill to be about $4 billion higher this year than last year. For the third quarter, it is assuming a fuel price of about $3.15 a gallon.
The carrier said it absorbed the highest quarterly fuel expense in its history, with total fuel expense of $4.4 billion, up nearly $2 billion from a year earlier. Carriers raised fares this spring to offset a surge in jet fuel prices tied to the Iran war, but those increases have not fully covered the hit.
Delta's adjusted pre-tax margin fell four percentage points from a year earlier. The carrier said it recovered about 60% of the fuel-cost increase in the quarter, faster than it has historically, and expects to recover more this quarter.
Chief Executive Ed Bastian said continued fuel volatility and weak industry returns should help keep current revenue momentum sustainable even if fuel prices moderate. Delta forecast 2026 adjusted earnings of $6.50 to $7.50 per share, above the $5.97 expected by analysts surveyed by LSEG. It forecast third-quarter adjusted earnings of $2.00 to $2.50 per share, compared with analysts' average estimate of $2.02.
Second-quarter adjusted earnings declined 26% from a year earlier to $1.56 per share, but still topped analysts' expectations of $1.48 per share.
