Iran war fuels airline shakeout, Delta signals
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Airline stocks surged Wednesday as a ceasefire in the Iran war eased fears of a prolonged fuel shock and Delta signaled that travel demand remains strong.
Why it matters: The spike in jet fuel prices has sparked fears of a slowdown in travel as ticket prices rise — but Delta's projections suggest travelers will be resilient.
Driving the news: Delta Air Lines reported March-quarter earnings Wednesday, with revenue up nearly 10% and earnings up 40%.
- Demand was strong across corporate and leisure travel.
- "We see actually really good demand right now across all entities," chief commercial officer Joe Esposito said on an earnings call.
Zoom in: 85% of corporate travelers expect their spending to increase or stay the same, according to Delta's research.
- That suggests "durable" demand "despite a significant increase in fuel costs and industry-wide operational disruptions," Deutsche Bank analyst Michael Linenberg wrote in a research note.
The impact: United Airlines shares were up 9.4% in midday trading, while American Airlines rose 7.4%. Delta was up 5.4%, and Southwest Airlines gained 6.4%.
Yes, but: The higher jet fuel prices go, the harder the toll on airlines — particularly budget carriers like Spirit and Frontier.
- Jet fuel accounts for about 30% of airline costs, according to Linenberg.
State of play: Delta says its own refinery has helped offset some fuel costs, but jet fuel prices have roughly doubled this year amid the Middle East conflict.
- The airline expects more than $2 billion in additional fuel costs this quarter.
- "High fuel prices have been the most powerful catalyst for change," Delta CEO Ed Bastian said Wednesday, warning that they can force airlines to "rationalize, consolidate or be eliminated."
Between the lines: Airlines are already adjusting by cutting or slowing capacity growth as well as raising fares and fees.
- "There's a high sense of urgency to address higher fuel and reduce unprofitable flying," Bastian said.
- On Tuesday, Delta said it is raising checked bag fees — joining other major carriers passing along higher fuel costs.
What we're watching: Whether jet fuel costs have hit their peak.

