Jet fuel cost Delta Air Lines an adjusted $3.61 a gallon in the September quarter, 60 percent more than a year earlier, and the airline is budgeting about $4.25 a gallon for the three months through December. Delta reported both figures in its Oct. 9 results, filed with the Securities and Exchange Commission. The quarter’s adjusted pre-tax profit still came in at $1.5 billion, matching last year’s.
The fuel numbers matter to anyone who flies, owns airline stock or works for the company, because fuel is one of an airline’s largest costs. Delta’s profit held flat only because revenue grew faster than the bill, and a fourth-quarter assumption that is higher again raises the question of who absorbs the difference: passengers through fares, shareholders through margins or employees through profit sharing.
Delta’s $4.25 assumption rests on fuel prices as of Oct. 2, and the profit sharing it has accrued for employees is not paid until next February.
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What the fuel line looks like in dollars
The $3.61 is Delta’s adjusted figure, which includes a benefit of about 13 cents a gallon from its refinery. The unadjusted, GAAP figure was $3.80 a gallon, up 68 percent from $2.26 a year earlier. The airline burned 1,146 million gallons in the quarter, up 1 percent from 1,138 million, so nearly all of the increase is price, not volume. Delta said in the release it expects to absorb a $6 billion increase in fuel costs over the full year, according to its newsroom summary.
The $4.25 for the December quarter is an all-in estimate. It includes a refinery benefit of about 40 cents a gallon and is based on the forward curve, the market’s price for future delivery, as of Oct. 2. That is roughly 64 cents a gallon above the September quarter’s adjusted price, or about 18 percent, by simple arithmetic.
Revenue kept pace on flat capacity
Adjusted revenue reached $17.6 billion, up 16 percent, a September-quarter record. Premium ticket revenue was $6.8 billion, up 18 percent on 6 percent more seats, and main cabin unit revenue rose 17 percent. Domestic unit revenue climbed 16 percent, international rose 12 percent and Latin America rose 22 percent. The passenger load factor held at 86 percent. Cargo revenue rose 29 percent.
Chief Executive Ed Bastian said in the release that “demand remains strong, supported by consumers’ growing preference for experiences and travel.” Chief Commercial Officer Joe Esposito said September-quarter revenue grew about 16 percent “on flat capacity,” meaning the gain came without added flying. For the December quarter Delta forecast revenue growth of about 20 percent, with seats growing less than 2 percent and a reduction in Main Cabin seats.
Where the profit goes from here
Margins narrowed even with flat profit. Adjusted pre-tax margin was 8.5 percent, down from 9.7 percent, and adjusted operating margin was 9.4 percent against 11.1 percent. Free cash flow was $463 million, down from $833 million. Under standard accounting, pre-tax income was $1.07 billion, down from $1.78 billion, and earnings were $1.15 a share against $2.17. Adjusted earnings per share were $1.72, compared with $1.70 a year earlier. Chief Financial Officer Erik Snell called that “in line with last year.”
For the December quarter Delta guided to an operating margin of 7 to 9 percent and earnings of $1.15 to $1.65 a share. For the full year it expects earnings of $5.10 to $5.60 a share, free cash flow of about $2.5 billion and a pre-tax profit of roughly $4.5 billion. Year-to-date free cash flow stands at $1.9 billion. Delta put its gross leverage at about 2.2 times and plans to pay down more than $2 billion of debt, and it expects non-fuel unit cost growth to improve by 1 to 2 points from the September quarter. Employees share in the result: the company recorded $389 million of profit-sharing expense in the quarter and has accrued nearly $900 million this year toward the payout next February.
Delta’s earlier forecast shows how far fuel has moved. In July, according to the Gulf Times, the airline assumed about $3.15 a gallon for the September quarter, and the actual adjusted price came in at $3.61. The same report put the peak for spot jet fuel at roughly $4.88 a gallon in early April.
Reading airfare and airline earnings against the fuel price
Delta’s results are in its filing with the SEC, where the fuel table, the reconciliation from GAAP to adjusted figures and the December guidance can be read directly. The adjusted-versus-GAAP gap, $3.61 against $3.80, is the first thing to check whenever a fuel number is quoted.
Delta’s own guidance describes what it is doing about the cost: fewer Main Cabin seats, more premium seats and revenue growth of about 20 percent from a base with seat growth under 2 percent. Travelers booking holiday flights are looking at an airline that told investors it plans to keep revenue growing faster than capacity.
The number to watch next is the fuel price itself. Delta’s $4.25 assumption will be tested against actual prices through December, and the company’s next results will show how close it came.
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This article was produced with AI assistance and reviewed by The Financial Wire’s editorial team.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
