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Delta Air Lines Inc. warned on Wednesday that rising jet fuel prices were likely to stunt the airline’s recovery from the COVID-19 pandemic.
The Atlanta-based Delta sees fuel prices rising to $2.25 to $2.40 per gallon, up 40 cents from the September quarter. A 5 cent increase in the price of fuel equates to about $40 million in added expenses. The airlines spent $1.5 billion on fuel last quarter.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| DAL | DELTA AIR LINES INC. | 63.82 | +0.20 | +0.31% |
Rising fuel prices "will pressure our ability to remain profitable in the December quarter," Delta CEO Ed Bastian said on the company’s third-quarter earnings call on Wednesday.
He sees Delta posting a "modest loss" in the December quarter with crude oil prices up more than 60% year to date and 15% over the last month. The airline doe not hedge its fuel costs.
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Even with the near-term headwind from higher fuel costs, the company expects to return to profitability in 2022 as air travel continues to recover and capacity is restored.
Delta on Tuesday reported a third-quarter profit of $1.2 billion, or $194 million excluding government aid and other items. It was the company’s first quarterly profit without including government aid since the outbreak of COVID-19.
DELTA AIR LINES DELIVERS A PROFIT, BUT FACES FUEL-COST PRESSURE
Delta shares were up 8.3% this year through Tuesday compared with the S&P 500’s 16% gain.