Delta Air Lines (NYSE: DAL) is looking for more ways to pass higher jet fuel costs to customers after the Iran war drove an expected extra fuel bill of about $2.5 billion this quarter, forcing the airline to balance fare increases, baggage fees, and capacity restraint against still-resilient travel demand.
Bloomberg reported that the carrier is “looking to do more” fare increases beyond steps already taken, while Delta’s recent earnings update pointed to more than $2 billion in higher June-quarter fuel expense at the forward curve.
The airline is targeting about $1 billion in June-quarter pre-tax profit despite the fuel shock, with low-teens revenue growth on flat capacity.
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CEO Ed Bastian told analysts that high fuel prices have historically forced structural change across the industry, “separating the winners” while pushing weaker carriers to rationalize, consolidate, or exit. He told Bloomberg that Delta is pursuing additional fare increases beyond those already levied.
The airline reportedly raised checked-bag charges for domestic and short-haul international flights to $45 for a first bag, $55 for a second, and $200 for a third, while keeping exemptions for premium cabin passengers, active-duty military, eligible cardholders, and certain loyalty members.
In its March quarter report, Delta posted operating revenue of $15.9 billion, up 13% from $14.0 billion a year earlier, but swung to a net loss of $289 million from net income of $240 million. Diluted loss per share was $0.44, compared with EPS of $0.37 last year.
Fuel expense rose 14% to $2.74 billion from $2.41 billion, as average fuel price per gallon increased 12% to $2.78 from $2.47, given that fuel gallons consumed only rose 1% to 988 million.
On an adjusted basis, Delta remained profitable. Adjusted operating revenue rose 9.4% to $14.2 billion, adjusted net income climbed 45% to $423 million, and adjusted diluted EPS rose 44% to $0.64. Adjusted fuel expense still increased 8% to $2.59 billion, with adjusted average fuel price up 7% to $2.62 per gallon.
Delta is not alone. United Airlines (NASDAQ: UAL) and JetBlue Airways (NASDAQ: JBLU) have also raised baggage fees, while United CEO Scott Kirby has said fares would need to rise about 20% to offset fuel costs if prices stay elevated.
Information for this briefing was found via Bloomberg, AP News, and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
