Key Points
- 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.
- Special Report: He bet half his $9 billion on ONE stock
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.
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?
How Higher Jet Fuel Costs Are Impacting Delta and United
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.
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.
Delta's Fuel Hedging Strategy Vs. United's Liquidity Approach
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.
Industry reporting has pegged the impact of that exposure, and it explains the problem well. A 1-cent move in jet fuel can cost a major U.S. carrier roughly $50 million a year, with no derivative book absorbing the blow.
Delta is the partial exception because it owns Monroe Energy, a Trainer, Pennsylvania refinery that supplies a meaningful share of its jet fuel needs. Third-party refinery sales hit $2.09 billion this quarter, up 83% year-over-year, and Delta credits the refinery with an 11-cents-per-gallon benefit this quarter (including a 5-cent hit from a temporary outage).
Delta's earnings report showed $301 million in mark-to-market hedge adjustments and settlements this quarter alone. That's not the 80%+ coverage ratios you see at Ryanair or Air France-KLM, but it's meaningfully more structural protection than a pure spot-market buyer.
United's approach is based on liquidity.
Management raised $3.7 billion in new liquidity through private bank transactions this quarter, explicitly described as "low-cost insurance" against a further oil spike.
Per sources, United has also secured select fuel supply contracts that limit some exposure—But these reportedly fall well short of the large-scale, derivative-based hedging programs that European carriers or Delta's refinery model provide.
Can Delta and United Pass Higher Fuel Costs to Travelers?
Rising jet fuel costs only matter if passengers aren’t willing to pay. So far, that hasn’t been the case. United grew capacity 3.5% year-over-year while still pushing adjusted unit revenue (TRASM) up 12.1%. Delta grew capacity roughly 1% while pushing TRASM up 12.4%.
Delta is generating comparable unit-revenue growth on a fraction of United's capacity growth—a tighter, lower-risk version of the same pricing story. United is growing into demand harder, which raises the ceiling if travel stays strong, and the downside if it doesn't.
Why Travel Demand Remains Strong Despite Higher Airfares
Both United and Delta cited increases in premium and economy/main-cabin demand. United's Basic Economy revenue rose 11%, and its overall economy-cabin unit revenue rose 12%. That was the airline’s second consecutive quarter of positive economy growth after a long soft patch. Delta's main cabin ticket revenue rose 8%, also its second straight quarter of positive main-cabin growth, while premium ticket revenue rose 17%.
At first glance, that pattern looks contradictory. The broader travel narrative through 2025 and into 2026 has been a "K-shaped" split: strong premium demand alongside a documented pullback in budget-conscious leisure travel, with ultra-low-cost carriers absorbing the brunt of that softness. If the price-sensitive traveler is genuinely pulling back across the industry, why are Delta and United both showing their cheapest cabins turning positive at the same time?
It may come down to a share shift rather than a demand surge. Neither Delta nor United built its brand around the price-sensitive flyer, but both have spent recent years building lower-tier fare products. United’s Basic Economy and Delta's comparable main-cabin fares are designed to compete for that traveler when needed.
As ultra-low-cost carriers cut capacity or struggle with their own economics, some of that traffic doesn't vanish. It shifts, "below the line," to a legacy carrier's cheapest available seat. That would reconcile positive economy-cabin growth at Delta and United with a well-documented pullback at the dedicated budget carriers.
Which Airline Is Better Positioned for Higher Fuel Costs?
Warren Buffett has been one of the most outspoken critics of airline stocks. Buffett’s argument comes down to high operating costs outweighing travel demand, which can be fickle. But every rule has occasional exceptions. In 2026, the airline industry is having a moment where, for now, math is working in its favor.
That doesn’t mean this time is different. It just means that there’s an opportunity for growth despite higher jet fuel prices. That is, as long as travelers are willing to absorb the higher costs.
If stock price growth is the only consideration, both UAL and DAL are attractive targets. In fact, an argument could be made that United has more short-term upside. But for an investor looking for long-term growth, Delta’s hedging strategy should do a better job of protecting its margins. Plus, DAL's dividend increased about 15% (from $0.1875 to $0.2150 per share), and will be paid on July 30, 2026, to shareholders of record as of July 9.
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