Delta Cuts Growth Plans Amid Rising Fuel Costs

Delta Air Lines announced plans on Wednesday to cut its capacity growth for the June quarter amid a surge in jet fuel prices driven by the US-Israel war on Iran. The airline expects to pay about $4.30 per gallon for jet fuel, adding more than $2 billion to its fuel costs compared with a year earlier.

According to The Guardian, Delta CEO Ed Bastian braced customers for higher fares and permanent baggage fee increases due to the elevated fuel prices. He noted that demand remains strong, particularly among wealthier customers who are continuing to invest in travel. However, Delta's share price has remained flat so far this year.

Delta expects adjusted earnings of $1.00 to $1.50 per share in the June quarter, with revenue up by low-teens percentage points compared with a year earlier. The airline also anticipates a $300 million benefit from its refinery in the second quarter, according to CNBC. Despite the higher travel costs, demand remains strong, particularly for premium products like first-class seats.

The surge in jet fuel prices has raised the prospect of an industry shakeout, with weaker airlines more likely to cut capacity or take on debt. Bastian warned that the fuel price spike would accelerate structural change across the airline industry, separating winners from weaker players. Airlines have begun trimming schedules and raising fees to offset higher costs.