TLDR
- Delta upgraded its first-quarter revenue forecast to “high-single-digit” growth from a previous 5%–7% projection
- First-quarter EPS guidance remains at 50–90 cents per share
- Fuel costs have soared over 50% following U.S. and Israeli military action against Iran in late February
- DAL shares climbed approximately 3.6% during premarket trading Tuesday following a 3.5% increase Monday
- Since the Iran conflict started, Southwest has fallen 26% and United has declined 21%
Delta Air Lines increased its revenue expectations for the first quarter on Tuesday, despite rising jet fuel costs triggered by escalating Middle East tensions. Shares gained 3.6% before the market opened.
The airline now anticipates first-quarter revenue will expand at a high-single-digit rate. This represents an improvement from the company’s January projection of 5% to 7% expansion.
Delta maintained its adjusted earnings per share forecast at 50 to 90 cents for the period. Management indicated that both leisure and business travel demand patterns have strengthened heading into March.
The airline attributed the enhanced revenue outlook to “demand momentum.” Delta emphasized its strategic positioning to weather the current challenges and stated it would modify capacity plans should fuel prices remain at elevated levels.
Jet fuel costs have climbed more than 50% since coordinated strikes by the U.S. and Israel on Iranian targets in late February. Current prices range between $150 and $200 per barrel, compared to approximately $100 before hostilities began.
Fuel expenditures typically account for 20% to 25% of airline operational expenses, ranking as the second-largest cost category behind personnel. The dramatic price increase has created significant headwinds across the industry.
The airline sector has faced substantial selling pressure since the conflict erupted. Southwest has tumbled 26%, United has fallen 21%, American has declined 20%, and Delta is down 14% — despite recent gains as crude oil prices retreated Monday.
Southwest’s performance makes it the S&P 500’s second-worst stock during this timeframe, trailing only Ulta Beauty.
JPMorgan Conference in Focus
The four largest U.S. carriers — Delta, United, Southwest, and American — are scheduled to present at the JPMorgan Industrials Conference in Washington on Tuesday. Several carriers may provide updated quarterly or annual projections.
Delta submitted its presentation materials ahead of schedule, before the conference commenced. This strategic timing gave investors an opportunity to evaluate the data before trading began.
United Airlines CEO Scott Kirby told The Wall Street Journal last week that he anticipates a temporary spike in ticket prices before rates stabilize. He also highlighted that last Monday represented United’s highest-ever booking volume in a single day.
Meanwhile, Germany’s Lufthansa has reported a significant increase in long-distance travel demand since the conflict started, suggesting robust travel interest despite geopolitical uncertainty.
Can Airlines Pass on Fuel Costs?
The critical question facing investors is whether airlines can mitigate higher fuel expenses through increased fares. UBS analyst Atul Maheswari wrote in a Sunday research note that market participants will closely watch airline management commentary regarding the ability to transfer fuel cost increases to customers.
Successful fare increases require sustained passenger demand. Early indicators suggest demand remains relatively strong.
One potential concern looms over the industry. Airlines might pull their full-year guidance, similar to their response in April last year when President Trump announced comprehensive tariff measures.
Delta maintains approximately two weeks of fuel reserves, providing temporary insulation. The adequacy of this buffer depends on the duration of elevated pricing levels.
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