Delta Air Lines is moving aggressively to protect margins and restore profitability after a sharp spike in fuel costs pushed it to a first-quarter loss, with the airline guiding to around $1bn in pre-tax profit in the June quarter despite significantly higher fuel expenses.
The carrier reported March quarter GAAP operating revenue of $15.9bn, alongside operating income of $501m and an operating margin of 3.2%. However, higher fuel costs drove a pre-tax loss of $214m and a loss per share of $0.44.
On an adjusted basis, Delta delivered stronger underlying performance. Non-GAAP operating revenue reached a record $14.2bn, up 9.4% year-on-year, with operating income of $652m and an operating margin of 4.6%. Adjusted pre-tax income was $532mn, with earnings per share of $0.64. Operating cash flow remained robust at $2.4bn, supporting free cash flow of $1.2bn after $1.2bn in capital expenditure.
Analysts at TD Securities said the results and outlook “highlight its durable business model”, noting that revenue came in slightly ahead of consensus while adjusted earnings per share beat expectations by a double-digit margin.
Looking ahead, Delta expects a sharp rebound in profitability, forecasting June quarter revenue growth in the low teens on flat capacity and earnings per share of $1.00 to $1.50. The airline is targeting an operating margin of 6% to 8% and expects around $1bn of pre-tax profit - despite an anticipated more than $2bn increase in fuel expense at current forward prices.
TD Cowen said the revenue outlook was stronger than its own expectations for low double-digit growth, while the margin and EPS guidance appeared conservative given the airline’s fuel assumptions.
Strategy pivot
The outlook reflects the impact of a rapid escalation in fuel prices linked to tensions in the Middle East, which Delta said had doubled jet fuel costs over the past month.
The airline expects all-in fuel prices of around $4.30 per gallon in the June quarter, based on the forward curve as of April 2, 2026, and incorporating a refinery benefit of approximately $300m. Like most of its US peers, Delta does not hedge fuel, leaving it directly exposed to market volatility.
TD Cowen noted that Delta’s guidance assumes a higher fuel price than both its own estimate of $3.80 per gallon and a consensus estimate of $4.05, suggesting potential upside if fuel prices normalise following the recent ceasefire between the US and Iran.
In response, management is taking a series of actions to offset the cost pressure, including reducing capacity, increasing ancillary revenues and adjusting fares.
“We’re taking the necessary actions to protect margins and cash flow,” said chief executive Ed Bastian. “We already have and will continue to be making some meaningful capacity reductions within the quarter.”
Delta said it would cut around 3.5% of its passenger capacity between April and June, with reductions focused on lower-yield flying such as midweek and overnight services. The airline is also targeting recovery of 40–50% of its higher fuel costs through pricing and network adjustments, according to company briefing comments.
Ancillary revenues are also being adjusted, with the airline increasing checked baggage fees and signalling further pricing actions to offset higher costs.
At the same time, Delta is relying on strong demand to support pricing power. Bastian said demand remained “broad based” across geographies and customer segments, allowing the airline to push through higher fares.
TD Cowen said the strength of Delta’s revenue outlook, even under elevated fuel assumptions, pointed to “minimal demand elasticity” and implied potential upside to consensus revenue estimates in the second half of the year.
Driving revenue strength
The March quarter results highlight the strength of Delta’s diversified revenue model, which continues to support earnings resilience despite cost pressures.
Premium revenue grew 14% year-on-year, reflecting continued demand for higher-yield products, while corporate travel rebounded strongly with double-digit growth across all sectors, led by banking, aerospace and technology.
TD Cowen highlighted that premium revenues outpaced main cabin growth by 13 percentage points, marking the fourth consecutive quarter of double-digit outperformance. It said that on a trailing 12-month basis, premium cabin sales of $22.75bn were nearly equal to main cabin sales of $23.43bn, underlining the structural shift in Delta’s revenue mix towards higher-margin products.
At the same time, the airline saw an important inflection in its core economy offering. The March quarter marked the first full quarter of positive unit revenue growth in main cabin since the end of 2024, signalling improving pricing power across the network.
Loyalty revenue, a key profit driver, increased 13%, supported by double-digit growth in American Express card spend and an expanding customer base. Remuneration from American Express exceeded $2bn for the quarter, up 10% year-on-year.
Maintenance, repair and overhaul (MRO) also contributed meaningfully, with revenue increasing by more than $200m year-on-year, reflecting strong execution by Delta TechOps. Cargo revenue rose 9%.
Overall, diversified revenue streams accounted for 62% of total revenue and grew at a mid-teens rate, underscoring Delta’s strategic focus on high-margin businesses beyond ticket sales. Unit revenue performance was also strong. Adjusted total unit revenue (TRASM) increased 8.2%, including a 1.6 point contribution from MRO. Domestic unit revenue rose 6%, while international unit revenue grew 5%, led by transatlantic routes.
Operational focus
Cost inflation remains a key challenge. Adjusted non-fuel unit costs rose 6% year-on-year to 15.13 cents per available seat mile, reflecting lower capacity growth, operational recovery costs and higher crew expenses.
Total operating expenses were $15.4bn on a GAAP basis and $13.5bn on an adjusted basis. Fuel expense increased 8% year-on-year to $2.6bn, with an adjusted fuel price of $2.62 per gallon, including a refinery benefit of 6 cents per gallon.
Delta expects non-fuel unit cost growth to remain at similar levels in the June quarter, driven by continued operational investments and labour costs. Management said improving operational resilience remains a priority, particularly after industry-wide disruptions earlier in the year.
Balance sheet strength
Delta’s balance sheet continues to be a key differentiator, particularly in a volatile operating environment.
Adjusted net debt stood at $13.5bn at the end of the quarter, down $760mn from year-end 2025 and below 2019 levels. The airline maintained an investment-grade rating across all three major credit agencies.
Liquidity was $8.1bn, including $3.1bn in undrawn revolving credit facilities, providing significant financial flexibility.
The company generated $2.4bn in operating cash flow during the quarter and paid down $1.6bn in debt and finance lease obligations. Its weighted average interest rate remains relatively low at 4.6%, with 86% of debt at fixed rates.
Air traffic liability, a proxy for future revenue, stood at $10.7bn, indicating continued strength in forward bookings.
The refinery edge
Delta’s ownership of a jet fuel refinery remains a unique feature among US airlines and provides a partial hedge against rising fuel costs, particularly when cracks spreads widen over crude oil as happened during the Middle East conflict.
The refinery is expected to deliver a $300m benefit in the June quarter, helping to offset elevated crack spreads.
“Our integrated fuel strategy is a unique differentiator,” the company said, noting that refinery economics help mitigate some of the volatility faced by unhedged carriers. However, the benefit is not sufficient to fully offset the scale of recent price increases, reinforcing the need for pricing and capacity adjustments.
Disciplined approach
Delta is also signalling greater flexibility in capital spending as it navigates the uncertain fuel environment.
The airline indicated it could delay aircraft deliveries from Airbus and Boeing if elevated fuel prices persist, as part of a broader effort to preserve cash and manage capital expenditure.\
“It’s too early to talk about deliveries,” Bastian said. “But we’re obviously going to be looking to save capex and cash flow if this is going to be with us for an extended period of time this year.”
At the same time, the airline continues to advance fleet modernisation, taking delivery of eight aircraft in the quarter and placing new orders to support long-term efficiency gains.
Strong outlook
Delta’s guidance reflects confidence in demand trends heading into the peak summer season, with corporate and leisure travel both expected to remain strong.
Corporate travel surveys indicate that 85% of customers expect spending to increase or remain stable in the June quarter, while premium demand continues to outperform.
However, fuel remains the key variable. The company declined to update full-year guidance, citing uncertainty over fuel prices and geopolitical developments. “We don’t know where fuel is going to go,” Bastian said.
Even as a ceasefire between the US and Iran has eased immediate pressure on energy markets, Delta expects fuel prices to remain elevated relative to pre-conflict levels, with supply disruptions likely to take time to unwind.
TD Cowen said the combination of easing fuel prices and Delta’s strong revenue trajectory could support a further rally in the shares, which had already risen in pre-market trading on April 8 news of the ceasefire.