- Delta raised its first-quarter revenue forecast to between $15 billion and $15.3 billion.
- According to Bastian, strong passenger demand offsets higher fuel and winter disruption costs
- Brent crude futures expiring in May increased 2% at $102 a barrel on Tuesday.
Delta Air Lines is feeling the heat from surging oil prices. Ed Bastian, CEO of Delta Air Lines Inc. (DAL), has warned that jet fuel prices have nearly doubled this quarter, creating a $400 million cost headwind even as travel demand remains strong, helping offset the impact.
Speaking in a CNBC interview, Bastian stated that a sharp increase in jet fuel prices has significantly raised expenses this quarter, even as customer demand continues to exceed expectations.
“Jet fuel prices have almost doubled just since the start of quarter. That’s a fairly significant hit for us about $400 million in the quarter. That said the demand drive has been great.”
-Ed Bastian, CEO, Delta Air Lines
Fuel Costs Surge
According to a CNN report, U.S. President Donald Trump has pressed allies to help ensure the oil tankers can pass through the critical Strait of Hormuz, but so far countries have either stayed neutral or refused to cooperate.
At the time of writing, U.S. West Texas Intermediate (WTI) crude futures maturing in May traded 3% higher at nearly $97 a barrel, and Brent crude futures expiring in May increased 2% at $102 a barrel.
Delta Airlines' stock traded over 5% higher in Tuesday’s premarket. On Stocktwits, retail sentiment around the stock remained in ‘bullish’ territory amid ‘high’ message volume levels.
Revenue Expectations Adjusted
Presenting at the J.P. Morgan Industrials Conference, Delta raised its first-quarter revenue forecast to roughly $15 billion and $15.3 billion, representing a 6.8% to 9% increase from $14.04 billion during the same period last year.
Delta reaffirmed its earnings guidance for the quarter, maintaining expectations of adjusted earnings between $0.50 and $0.90 per share. According to Bastian, robust passenger demand is helping counterbalance not only higher fuel costs but also operational challenges stemming from a difficult winter travel season.
The airline’s forward bookings continue to show resilience, even amid global uncertainty. Bastian said reservations have increased 25% year-on-year, indicating sustained consumer appetite for travel.
Since the start of the U.S.-Iran conflict, American Airlines and United Airlines have declined 19% and 15%, respectively, while DAL has dropped over 7%.
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