Shares of Delta Air Lines surged sharply in early Wednesday trading, lifted by stronger-than-expected earnings and optimism following a two-week cease-fire agreement between the US and Iran that sent oil prices tumbling.
The stock jumped more than 11% after the market opened, putting it on track for one of its strongest single-day gains in over a year.
The rally comes as falling crude prices ease concerns about fuel costs—one of the biggest expenses for airlines—while robust travel demand continues to support revenue growth.
Earnings beat offsets fuel cost concerns
Delta reported first-quarter adjusted earnings of 64 cents per share, beating analyst estimates of 58 cents, according to FactSet data. Revenue came in above expectations as well, rising 12.9% year-over-year to [MONEY value=”15850000000″ currency=”usd” notation=”long” replace=”false”].
Despite a challenging fuel environment, the airline signaled confidence in its ability to sustain profitability.
It expects to generate a [MONEY value=”1000000000″ currency=”usd” notation=”long” replace=”false”] pretax profit in the current quarter, even as fuel costs are projected to rise by more than [MONEY value=”2000000000″ currency=”usd” notation=”long” replace=”false”].
“Demand remains strong, and we are taking actions to protect our margins and cash flow,” said CEO Ed Bastian. “This includes meaningfully reducing capacity growth, with a downward bias until the fuel environment improves, and moving quickly to recapture higher fuel costs.”
For the second quarter, Delta expects revenue growth in the “low-teens” percentage range. However, its earnings per share guidance of $1 to $1.50 fell short of Wall Street expectations of $1.56.
Cease-fire and oil drop lift sector sentiment
The timing of Delta’s earnings release coincided with a sharp drop in oil prices, as crude futures plunged 16.5% following the cease-fire announcement. Lower fuel costs are widely seen as a near-term tailwind for the airline industry.
Delta noted that its guidance, issued earlier this month, was based on fuel assumptions as of April 2 and does not yet reflect the potential benefit of declining jet fuel prices if the cease-fire holds.
The broader airline sector rallied in tandem. Shares of United Airlines rose about 12%, while American Airlines gained roughly 9.8%, and Southwest Airlines climbed 11%. The US Global Jets ETF also advanced 9.2%.
Even before the latest gains, Delta had outperformed its peers, trading roughly flat during the recent geopolitical tensions, while the broader airline ETF declined.
Refinery advantage and pricing power in focus
A key differentiator for Delta remains its ownership of an oil refinery, which helped reduce fuel costs by more than 2% per gallon in the first quarter. The company expects this asset to provide a [MONEY value=”300000000″ currency=”usd” notation=”long” replace=”false”] benefit to second-quarter expenses.
At the same time, Delta has moved quickly to offset higher fuel costs through pricing actions.
Chief Commercial Officer Joe Esposito previously said fuel surcharges on international flights had already “gone in,” while base fares for domestic routes have also increased. The airline has also raised checked-bag fees, following similar moves by competitors.
“While the recent fuel spike is currently impacting earnings, I’m confident this environment ultimately reinforces Delta’s leadership and accelerates long-term earnings power,” Bastian said.
Although fuel costs remain a key uncertainty, Delta’s results suggest that strong demand and operational flexibility may help cushion the impact.
Still, the sustainability of current trends will depend heavily on whether the cease-fire holds and energy markets remain stable.
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