Fuel Costs Hit Airlines; Delta Cuts Forecast, El Al Benefits from Lack of Competition

Delta Air Lines significantly lowered its 2026 profit forecast, attributing the reduction almost entirely to rising fuel costs. The airline now projects adjusted earnings between $5.10 and $5.60 per share, a sharp decrease from its previous July estimate of $6.50 to $7.50. As the first major U.S. carrier to report third-quarter results, Delta's performance is seen as a key indicator for the entire industry ahead of the busy holiday travel season.

While the new forecast aligns with analyst expectations of around $5.40 per share, the third quarter itself fell short, with adjusted earnings of $1.72 per share against a consensus of $1.82. This marks the first time in two years that Delta has missed market expectations, causing its stock to drop approximately 3% in pre-market trading. The company anticipates an additional $6 billion in fuel costs this year compared to 2025, with third-quarter adjusted fuel expenses soaring 62% to about $4.1 billion. Delta also reduced its full-year free cash flow projection to $2.5 billion from up to $4 billion.

Despite the fuel challenges, Delta reported a 16% increase in adjusted revenue to approximately $17.6 billion, driven by strong performance in premium classes and its partnership with American Express. The airline's ability to offset most of the fuel cost increase through higher ticket prices and increased passenger spending, particularly in premium cabins which accounted for 61% of adjusted revenue, kept pre-tax profit largely unchanged year-over-year. Delta expects continued demand and passenger willingness to pay higher fares into next year, citing that airfare increases have lagged inflation.

In other developments, Delta's choice of Amazon's satellite internet service over SpaceX's Starlink for in-flight Wi-Fi drew public criticism from Elon Musk. Additionally, the airline's planned new route from Atlanta to Riyadh, Saudi Arabia, faces uncertainty due to recent Houthi attacks in the region, including one at Riyadh's King Khalid Airport that killed three people. Delta CEO Ed Bastian stated that safety will be the deciding factor in the route's launch, with a decision to be announced soon. Lufthansa has already suspended its flights to Saudi Arabia.

Meanwhile, in stark contrast, Israel's El Al doubled its net profit in the second quarter to approximately $132 million on revenues of $986 million, a 27% increase. This occurred despite a $55 million impact from the "Iron Swords" war and a 14% rise in fuel cost per seat-kilometer. This limited competition allows El Al to pass on higher fuel costs to passengers more effectively than Delta, which operates in a highly competitive U.S. market. El Al's controlling shareholder, Keni Rosenberg, has reportedly rejected offers to purchase his stake.