Delta Air Lines stock was falling early Friday after the carrier missed earnings expectations and cut its full-year guidance.
Demand remains strong and the airline even posted record third-quarter revenue of $17.6 billion. But high jet-fuel prices are really starting to hurt the industry.
The airline now expects full-year earnings per share of between $5.10 and $5.60, down from a range of $6.50 to $7.50. Wall Street analysts already felt the previous guidance was ambitious but the new forecast also slips below the analysts' consensus of $5.50.
Delta reported adjusted EPS of $1.72, below FactSet estimates of $1.77.
Fuel expenses jumped 62% to $4.1 billion in the third quarter compared with the year-ago period. That's with an average fuel price of $3.61 per gallon.
It's probably going to get worse -- Delta's guidance factors in an expected price of $4.25 a gallon in the fourth quarter. The company expected to generate a pretax profit of $4.5 billion this year, absorbing an eye-watering $6 billion increase in fuel costs, CEO Ed Bastian said.
The stock has been a winner in a turbulent year for the sector and that's still likely to be case despite a 2.8% fall in early trading. Its peers American Airlines and United Airlines were both down more than 2%.
Jet-fuel prices have been back on the rise in recent months, recovering from the slump since the U.S. conflict with Iran started on Feb. 28 -- jumping around 60% since reaching wartime lows in June. That poses a problem for airlines this earnings season and for the rest of the year.
Carriers have relied on strong travel demand, increases to airfares, and capacity cuts to mitigate the impact of surging fuel costs.
Delta's earnings suggest demand is holding up and when it comes to capacity cuts, Chief Commercial Officer Joe Esposito said it was reducing main cabin seats with total seats growing less than 2% in the fourth quarter.
"With earnings season upon us, the prevailing question among investors is how the industry plans to respond to higher fuel prices," Deutsche Bank analyst Michael Linenberg said earlier this week. His view is that higher airfares may be the response but warned it could start having an impact on demand.
Delta is one of just four airlines Deutsche Bank sees being profitable this year with average jet-fuel prices staying just under $4 a gallon -- United Airlines, Southwest Airlines, and Allegiant are the others.
Delta has comfortably outperformed its peers, rising 18% so far in 2026 as of Thursday's close. Rivals United Airlines and American Airlines have fallen 4% and 17%, respectively. However, it hasn't been immune to the recent pressure -- Delta's shares have fallen 6% over the past three months. Its peers have just had it worse.
It's beating its rivals for several reasons -- including its strength in the premium travel category, where passengers are more likely to accept higher fares. That was in evidence again in the third quarter as premium revenue jumped 18%. It has other strings to its bow, such as cargo revenue, which climbed 29% and MRO (maintenance, repair, and overhaul) revenue, up 28%.
Owning a refinery in Trainer, PA has also helped. Delta's refinery revenue surged 76% to $2.6 billion in the third quarter. In the first nine months of the year, refinery revenue is up 72% to $6.3 billion, helping to offset the huge increase in fuel costs.
The benefit could really come into its own in the fourth quarter, when Delta expects the refinery to save around 40 cents a gallon fuel prices.
With jet-fuel prices remaining high, the carrier will maintain its advantage.