Delta Air Lines has moved out of near-term “crisis mode” following its first-quarter results, according to JPMorgan, which said strong demand and pricing power helped the airline absorb a sharp rise in fuel costs.
In a research note following Delta’s April 8 investor update, JPMorgan said the carrier’s second-quarter guidance had “comfortably addressed” concerns about weakening demand, prompting a lift to its 2026 earnings outlook despite continued uncertainty over fuel prices (click here for Delta’s Q1 results).
Delta reported adjusted earnings per share of $0.64 for the first quarter, ahead of both JPMorgan’s $0.54 estimate and consensus forecasts, even as fuel costs rose sharply. Revenue increased 9.4% year-on-year on roughly 1% capacity growth, driven by strength across premium, corporate and international segments.
JPMorgan highlighted that higher-margin revenues were key to offsetting the fuel shock. Premium revenue rose 14% year-on-year, while loyalty income increased 13% and corporate sales grew at a double-digit rate, with particular strength in banking, aerospace and technology sectors.
The bank said Delta’s ability to lean on these segments underpinned its confidence in the airline’s pricing power, noting that management expects to recapture 40–50% of a more than $2bn fuel headwind in the second quarter. It added that full recapture could be achievable in the second half of the year if fuel prices remain elevated.
While the outlook remains highly sensitive to oil prices, JPMorgan described Delta’s second-quarter earnings guidance, based on fuel of about $4.30 per gallon, as a “welcome surprise” that clears a high bar given recent volatility.
The bank has raised its 2026 earnings estimate to around $3.65 per share, roughly half its pre-US-Israel Iran conflict forecast of $7.05, reflecting improved revenue assumptions and tighter capacity. It said a sustained easing in fuel prices could provide further upside.
JPMorgan also pointed to widening divergence across the industry, warning that persistently high fuel costs would disproportionately affect lower-cost carriers. It highlighted the financial strain on Spirit Airlines, whose margins could deteriorate sharply under current fuel assumptions, reinforcing the advantage of premium-focused airlines such as Delta.
That structural shift is expected to continue, with JPMorgan noting that Delta’s premium revenues are on track to overtake main cabin sales, potentially as early as late 2026, ahead of the airline’s own 2027 target. The bank added that the traditional low-cost carrier model appears increasingly “impaired” in the current environment.
On credit, JPMorgan reaffirmed Delta as the strongest balance sheet in the US airline sector, describing it as the “premier credit in the space”. Despite relatively low liquidity, around 12.5% of last-twelve-month revenue compared with roughly 26% at United Airlines and about 17% at Southwest Airlines and American Airlines, the bank said Delta benefits from a large pool of unencumbered assets and significant secured borrowing capacity, estimated at about $35bn.
Ratings, currently in the BBB range with positive outlooks, are not seen as at risk despite the additional $2bn fuel burden in the second quarter. JPMorgan said it expects agencies to move towards mid-BBB over time, with potential for further upgrades as leverage declines.
Gross leverage was unchanged at 2.4x in the first quarter, as Delta continues to prioritise debt reduction. The bank noted that while higher fuel costs will weigh on free cash flow, potentially below the airline’s earlier $3-4bn annual target, deleveraging should continue, albeit at a slower pace.
Liquidity stood at $8.1bn at quarter-end, supported by strong cash generation and recent refinancing activity, including a $1.3bn unsecured term loan used to replace more expensive pandemic-era debt.
Despite these strengths, JPMorgan maintained a neutral stance on Delta’s credit valuation, noting that its bonds already trade at the tightest levels in the sector. However, it sees scope for spreads to tighten further relative to broader transport peers if market sentiment improves.
Overall, the bank said Delta’s results reinforce its ability to navigate volatility, with resilient demand, a premium-heavy revenue mix and disciplined capacity management helping to offset one of the sharpest fuel shocks in recent years.