Jet fuel is the story at Delta this year. On Friday, Oct. 9, the airline slashed its forecast for the year. Fuel costs are running $6 billion higher. Yet Delta Air Lines (DAL) still expects to make money, and some rivals don't. Alison Sider sat down with CEO Ed Bastian for Monday's Journal to ask how.
Bastian's answer starts with a number he calls pretty stunning. Fuel prices are up 60%. Delta's profit is about where it was a year ago. In past fuel spikes, he says, the industry never managed that. This year's playbook was blunt. Cut routes. Charge more for fares and checked bags. Travel demand has held up so far. Delta trimmed seats in the market where it sees the most pain, lower-income travelers, who feel higher fares first.
Two engines that don't burn jet fuel
The first is the front of the plane. Delta has pushed premium cabins for 15 years, and Bastian says premium supply is still in the early-to-mid innings against demand. Holiday bookings look strong, and he told Sider he expects fourth-quarter revenue up 20%. That's his spoken figure, and we'll let him own it. The second engine is a credit card. American Express (AXP) pays Delta for the co-brand cards, the ones that carry both names. New cards and card spending each grew more than 10% last quarter. Delta expects over $9 billion from Amex this year, up from $8.2 billion last year.
That number helped Amex on Friday. It needed the help. The Office of the Comptroller of the Currency fined Amex $350 million for a financial-crimes compliance program it found inadequate. Amex opened down about 1% and closed up 0.3%. Delta's own shares ended roughly flat. On Starlink, nothing has changed since our Oct. 7 piece. Delta passed on it in favor of Amazon, and Bastian says he doesn't read Elon Musk's criticism. United, Tuesday's Travel column notes, is using a status match to court Delta's frequent fliers.
Our read
Two planning domains. Investments and Risk (IN04) first. A $6 billion jump in one airline's fuel bill is what an oil shock looks like up close. It's also the reason the books hold energy as the hedge. Chevron (CVX) sits in 37 books, Exxon Mobil (XOM) in 34 and Cheniere (LNG) in 20. ConocoPhillips (COP) is in 17 and Valero (VLO) in 12. All are held at weight, nothing added this week. When fuel squeezes an airline's margin, the producers on the other side of that trade tend to collect it. We don't hold Delta, and United (UAL) sits in 3 books at about half a percent. Airlines are a hard business in a good year, and this isn't one.
Cash Flow (M5) is the one that touches your own plan. Delta's answer to dear fuel was fewer cheap seats, higher fares and bag fees, and you're the one paying them. The check this week is your holiday travel line. Price the flights you haven't booked yet, add the checked-bag fees, and put the real total in the December budget before the planes fill. If you carry an airline co-brand card, pull the annual fee. Ask whether the perks you actually used this year covered it. That card deal is worth more than $9 billion a year to Delta. Then look at whether your own portfolio holds anything that does better when fuel goes up. Booking in late November is buying the umbrella in the rain, and the December budget is a fine thing to bring to a plan review.