Delta Slams the Brakes on Growth as Fuel Costs Bite – but Its Refinery Softens the Blow

CNBC, the New York Times, Bloomberg, the Financial Times, the Wall Street Journal contributed to this report.

Delta Air Lines is pulling back.

CEO Ed Bastian said the carrier will “meaningfully reduce” its growth plans in the near term as jet fuel prices spiral, adding to a broader retreat across the airline industry. Capacity that was once set to expand is now expected to stay flat this year.

Fuel is the problem – and it’s getting expensive fast. Delta expects its fuel bill to jump by about $2 billion this quarter alone, with prices hovering around $4.30 a gallon. Since the war in the Middle East erupted, jet fuel costs in the US have surged far more sharply than crude oil.

Airlines are already reacting. Delta, along with United Airlines and JetBlue Airways, raised checked bag fees this week. Fares are creeping higher too, and fewer flights could push them up even more.

Yet demand hasn’t cracked – at least not yet. Bastian said customers are still spending, especially on pricier seats with extra space and perks. Premium ticket revenue jumped 14% in the first quarter, helping cushion the blow from rising costs.

And then there’s Delta’s not-so-secret weapon: its refinery.

Unlike most airlines, Delta processes its own fuel through a facility near Philadelphia, which it bought from Phillips 66 back in 2012. That operation is now turning into a major advantage. The company expects a $300 million boost from the refinery this quarter, helping offset some of the pain from sky-high fuel prices.

“We don’t know where fuel is going,” Bastian said, but added that the refinery will keep providing support as long as prices stay elevated.

The numbers tell a mixed story. Delta beat expectations for the first quarter, posting adjusted earnings of 64 cents per share on $14.2 billion in revenue. Both came in ahead of Wall Street forecasts. Net income climbed to $423 million.

Looking ahead, the airline is guiding for second-quarter earnings between $1 and $1.50 per share – roughly in line with expectations – and revenue growth in the low teens.

Still, there’s hesitation. Delta isn’t updating its full-year outlook, even after earlier predicting a potential record year. Too many unknowns, especially around fuel.

Other cracks are worth watching. Business travel dipped briefly during last month’s airport chaos tied to the partial government shutdown, though Bastian said it has since rebounded. And while demand remains strong, there’s lingering uncertainty over how long travelers will tolerate higher prices.

For now, the strategy is clear: cut back where needed, lean on premium customers, and let the refinery do some of the heavy lifting.

It’s not a full retreat. But the industry’s growth story just hit turbulence.