Delta CEO warns airfare will stay high despite falling oil prices

Delta Air Lines is telling travelers not to expect relief at the ticket counter even as crude prices retreat from recent highs, signaling that structural cost inflation has permanently reshaped how the industry prices seats.

"Fuel has decreased in the last couple weeks, certainly, and the demand for the products has never been greater," Erik Snell, Delta's chief financial officer, told reporters. "I've been here 21 years and can't remember a point in time where demand across the board for not only Delta, but for travel, has been this strong."

The comments come as Delta reported record second-quarter revenue of $19.8 billion, up 19% from a year ago, while profit fell 25% to $1.6 billion after fuel costs rose by two-thirds. The carrier absorbed what Bastian called "the highest quarterly fuel expense in our history" — jet fuel prices averaged $3.66 a gallon in the quarter, up 48% from a year earlier, according to US Energy Information Administration data.

The disconnect between falling crude and sticky airfares reflects a broader shift in airline economics. Since the pandemic, Delta, American and United have reconfigured aircraft to expand premium seating, with Delta's next-generation Airbus A350-1000 arriving in 2027 devoting nearly half its cabin to premium cabins. American plans to expand premium seating by 50% by the end of the decade. These higher-margin seats now generate a disproportionate share of revenue — on transatlantic routes, business-class tickets alone can bring in nearly as much revenue as the entire economy cabin, according to McKinsey & Company.

The Iran war, which pushed US jet fuel prices 48% above year-ago levels, has compounded cost pressures that predate the conflict. Delta's fuel bill rose to roughly $4 billion in the quarter, and the carrier expects elevated costs to persist even as Brent crude has eased from April highs. Bastian said the company managed to report a profit "while absorbing the highest quarterly fuel expense in our history," and reaffirmed full-year earnings guidance of $6.50 to $7.50 per share.

For consumers, the math is stark. US airfares in May were 62.7% higher than a year earlier, the largest increase in the Consumer Price Index's airline category on record. Delta has introduced tiered "basic" fares for premium cabins that strip out seat selection and lounge access, while basic economy tickets on all major carriers now exclude seat assignments and checked bags. Add-on costs fall heaviest on economy travelers, said William J. McGee, senior fellow for aviation at the American Economic Liberties Project. "The idea that we're all created equal? Not in the airlines' eyes," he said. "Not by any means."

The last time jet fuel prices spiked this sharply was in 2022 following Russia's invasion of Ukraine, when US airlines raised fares by 25% over three months and still saw demand hold. The current cycle may prove stickier: Delta, United and American have all signaled they will maintain pricing discipline rather than chase market share, a strategy that has pushed industry profit margins to record levels even as input costs surge. Delta expects double-digit margins and a return to earnings growth in the second half of the year, Snell said.

This article is for informational purposes only and does not constitute investment advice.