Key Highlights
- Delta’s first-quarter adjusted earnings per share reached 64 cents, surpassing the analyst estimate of 58 cents; quarterly revenue of $14.2 billion exceeded forecasts.
- Shares of DAL climbed approximately 13% during premarket hours, while competitors United, American, and Southwest gained between 9% and 11%.
- The airline projects Q2 adjusted EPS in the range of $1.00 to $1.50, with the $1.25 midpoint trailing the $1.41 consensus estimate.
- Second-quarter fuel expenses are anticipated to increase by over $2 billion compared to last year, as jet fuel prices have nearly doubled since late February amid Iran tensions.
- Delta eliminated all previously planned second-quarter capacity expansion and implemented higher checked-baggage fees to counter escalating costs.
Delta Air Lines delivered first-quarter results that exceeded Wall Street forecasts, propelling its shares significantly higher during Wednesday’s premarket session. The positive momentum gained further support from the announcement of a two-week U.S.-Iran ceasefire, which boosted the broader airline sector.
The carrier reported adjusted earnings of 64 cents per share, outperforming the consensus range of 57 to 58 cents. Quarterly revenue totaling $14.2 billion also surpassed analyst projections. The strong performance lifted shares of competing airlines, with United, American, and Southwest climbing 9% to 11% in premarket trading.
However, the company’s second-quarter forecast struck a more conservative tone. Delta issued adjusted EPS guidance of $1.00 to $1.50, placing the midpoint of $1.25 beneath the $1.41 analyst consensus. Management chose not to revise its full-year outlook, pointing to continued uncertainty surrounding fuel prices.
Jet fuel costs have surged dramatically, nearly doubling since the end of February due to heightened geopolitical tensions involving Iran. Delta anticipates paying approximately $4.30 per gallon during the second quarter, representing an additional fuel expense exceeding $2 billion compared to the prior-year period.
To mitigate the financial impact, Delta is deploying several strategies. The company’s proprietary oil refinery is projected to generate a $300 million benefit in Q2, a substantial increase from the roughly $60 million contribution in Q1 as refining margins expanded. CEO Ed Bastian indicated the airline plans to recoup 40% to 50% of elevated fuel costs through ticket price increases during the quarter.
The carrier also implemented higher checked-baggage fees on Tuesday, mirroring recent actions by United and JetBlue. When asked about the permanence of these increases, Bastian suggested they may remain in place. “When fuel reaches this level, it becomes difficult to characterize anything as temporary,” he stated.
Capacity Reductions Underway
Delta scrapped all capacity growth previously scheduled for the June quarter, representing a reduction of approximately 3.5 percentage points from its initial plan. The airline added that future capacity growth projections now carry a “downward bias until fuel market conditions stabilize.”
Across the U.S. airline industry, carriers have collectively trimmed planned domestic capacity growth by more than half a percentage point since mid-March. Delta’s refinery assets and robust demand profile position it comparatively well among peers to weather the fuel cost headwinds.
Bastian reported that ticket sales have increased at a double-digit rate year-over-year throughout the past month, with strong momentum carrying into the second quarter. Affluent travelers, in particular, have demonstrated no indication of reducing travel spending.
Wide Divergence in Analyst Forecasts
Full-year EPS projections among Wall Street analysts span an exceptionally broad range—from a mere 15 cents to $7.50—illustrating significant uncertainty regarding the trajectory of fuel prices. The consensus estimate stands at approximately $5.40 to $5.52, according to LSEG and FactSet data.
JPMorgan adopted the most conservative stance, dramatically reducing its forecast from $7.05 to just 15 cents. Analyst Jamie Baker explained that his team had “embraced” a full-year jet fuel assumption that likely cannot be offset through fare increases—though the firm retained an Overweight rating on the stock.
UBS analyst Atul Maheswari maintained a Buy rating with a $5.12 EPS estimate but acknowledged he wouldn’t be shocked if Delta withdrew its full-year guidance altogether.
In January, Delta had provided full-year adjusted EPS guidance of $6.50 to $7.50. Bastian opted not to revise that range during Wednesday’s announcement.
