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Delta Air Lines and United Airlines both absorbed sharply higher jet fuel costs this quarter, but Delta's earnings and margins held up better than United's.
Delta's Monroe Energy refinery and hedging gains provided more structural fuel-cost protection than United's liquidity-based approach of raising cash reserves.
Both airlines successfully raised ticket prices to offset fuel inflation, with Delta achieving comparable unit-revenue growth while expanding capacity far less than United.
Airline stocks' sensitivity to jet fuel prices is tested whenever fuel spikes. In 2026, fuel costs are testing every airline's balance sheet. This quarter, both Delta Air Lines (NYSE: DAL) and United Airlines (NYSE: UAL) passed the test on paper. But they passed it in very different ways—and the difference matters more than the headline numbers.
Delta's adjusted fuel price rose to $3.93 a gallon, up 75% year over year. United's was worse: $4.19 a gallon, up nearly 80%. Neither number is small. United took a significant year-over-year hit to adjusted earnings per share (EPS) and now expects almost $6 billion in incremental fuel expense for full-year 2026, up from its original budget.
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That's real data that investors shouldn't dismiss as quarterly noise. The question becomes which airline has the structural tools to keep passing that cost through to ticket prices without losing the traveler?
As noted above, United's adjusted EPS fell 48.6% year-over-year, from $3.87 to $1.99. Delta's adjusted EPS fell 26%, from $2.12 to $1.56. The same pattern was evident in margin compression. United's adjusted pre-tax margin fell just over six points, from 11% to 4.8%. Delta fell four points, from 11.7% to 7.7%. Delta's earnings base shrank by a smaller proportion, even though both carriers faced comparable fuel inflation.
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To be fair, not all of the weakness in United's EPS and margin numbers was due to fuel costs. The company absorbed $184 million in one-time labor contract charges this quarter, versus $561 million a year ago.
At the crux of the "built for higher fuel costs" question is the strategy of fuel hedging. Most U.S. major airlines walked away from large-scale fuel hedging years ago. Unlike European carriers such as Air France-KLM (OTCMKTS: AFLYY) or Ryanair (NASDAQ: RYAAY), which routinely lock in 70%–90% of fuel needs through derivative contracts extending a year or more out, U.S. legacy carriers have largely stopped using the strategy.
Source: Yahoo Finance Top News — This article was automatically imported from the source. Read full article at original source →
