Delta Cuts Profit Outlook as Surging Fuel Costs Tighten Grip

The flying public is key to getting them across these higher fuel prices. And so for the I mean Delta had to cut their earnings forecast for the year. They sort of expect now to get between 510 and 560 a share in 2026, down from 650 to 750. And that's largely down to jet fuel. And so the one in the Middle East has driven up jet fuel prices. And airlines are desperate to find ways to sort of mitigate that higher fuel cost. And the way they've sort of decided to do that is through higher fares. At one point, these airlines used to hedge their jet fuel prices, and they don't anymore. But I do recall that Delta owned a refinery, I believe. So Delta does own a refinery. And so they are one of the few airlines, and I think probably the only airline in the world that has sort of been better insulated from this because of the fact that they own a refinery. And so some of that higher jet fuel prices, sort of offset by the profitability of the refinery. At the same time, like jet fuel prices have surged. And so for airlines, they have to find a way to pass on those higher fuel costs. And for Delta they're saying demand is holding up. They're saying people are willing to pay the higher fares because travel is a priority. Other airlines are sort of seeing less of an impact. I've been mourning ever since the big yellow airplane went away, just like it's it's just like it just. Is it really like the end of discount airlines altogether? So it is that whole K shaped economy that we keep coming back to where Delta sees people continuing to pay for business class seats and premium airfares. While at the bottom end of the curve, people are sort of being more astute about where they fly to, how much they spend on travel, and cutting back where they need to. So there is that skew in the market where Delta United, which went all in on premium travel, uh, seeing uh, demand continuing to sort of hold up, whereas other carriers that are sort of more exposed to price sensitive customers are seeing some sort of demand waning. I recently flew from California back to New York, and I noticed that the first third of the airplane was first class. The second third of the airplane was business class, and the last third was economy, and the economy used to be economy. It's like it's just like this big now. Yeah. It's it's it's tiny. And we're seeing other airlines kind of move in the same direction of banking all on premium passengers. Right? I mean, southwest now makes you pay for, um, your checked luggage. And they have launched a premium credit card. JetBlue has a first class, uh, that they just launched as well. Yeah. So every airline is looking to sort of lean on those higher paying customers. So we've seen airlines, including JetBlue and others launching, uh, launching new lounges. Mhm. Uh, premium cabins, talking about, like, flat seats. And so we're seeing airlines really sort of catering to that premium customer who can afford to pay those higher prices at a time when price sensitive customers are saying, maybe I won't fly this this Thanksgiving or this Christmas and relying on those premium customers, we should get back their earnings, you know, how are they doing? Is it working? It seems to be working. Delta today talked about how they are 60% booked for December. They're seeing bookings continuing to be strong. And so we're we're seeing that the airlines are seeing that premium customers are still feeling good about their spending.