Delta Gloats To Investors That Higher Fares Are Sustainable, Even As Oil Gets Cheaper

In recent times, we’ve seen the cost of airfare increase massively — according to data, in the United States, the average increase has been around 30% over five months. Admittedly a major reason for the fare increases is how much jet fuel has gone up in cost, due to the war with Iran, which doesn’t seem to be ending any time soon.

However, one thing has become clear — airlines are using this as an opportunity to try to improve their long term prospects, by permanently introducing fare hikes… well as, permanent as anything in the industry is. Delta executives have today directly acknowledged that.

Delta CEO admits fares will stay high regardless of fuel costs

Delta is the most profitable airline in the United States, and the carrier is also always the first to release its earnings results. The airline has today announced its Q2 2026 performance, and the results are strong, despite the headwinds that the company has faced.

Comparing results to the same quarter last year, revenue grew by a staggering 14%, while capacity only increased by 1%. Seeing year-over-year double digit revenue increases is pretty impressive in an industry like this, especially when it’s not due to growth.

To break that down a bit more, we saw a 17% increase in premium revenue, and even an 8% increase in economy revenue. Economy revenue growth has otherwise been a struggle in recent times, so that’s a reflection of how airlines have been able to sustain fare increases, even among more price sensitive customers.

But I think what’s even more interesting is what Delta CEO Ed Bastian said during the earnings call. He said that increased fuel costs have “proven to be the most powerful catalyst for change in our industry,” and he means that in a positive way.

He pointed out how most airlines in the United States “were already struggling to earn their cost of capital against a backdrop where industry airfares have meaningfully trailed inflation, costs have reset higher, and consumer preferences have evolved.”

But he added how “structural change has accelerated, enabling the industry to recapture this year’s fuel cost inflation at the fastest pace of any recent cycle,” indicating that “we believe current revenue momentum should remain sustainable even if fuel prices moderate.” He referred to this as “an important step towards improving the industry’s financial health and earning sustainable returns over time.”

Are airlines being overly optimistic with higher fares?

In fairness, what Bastian said here wasn’t surprising. In early April I already covered how he said that fares may not decrease even if oil prices go down, but now we have more data to actually back up how performance has evolved. For that matter, this matches exactly the narrative we’ve heard from United executives as well.

They’re absolutely telling the truth here, in terms of how airlines are approaching this — the only lie was when Bastian recently suggested that fares will only go down when our air traffic control system is fixed.

Here’s the truth of the matter, as I see it:

• The cost of airfare isn’t based on the cost of providing the seat, but instead, it’s based on supply and demand, and trying to maximize incremental revenue; demand is based on macroeconomic factors, while supply can be controlled by cutting some flights
• Several major US airlines haven’t turned a profit in years, since airline profitability is increasingly tied to credit card revenue, which puts little airlines at a major disadvantage
• Of course Bastian almost makes it sound like he’s approaching increased fares in an altruistic way, looking out for the airlines that aren’t covering the cost of capital, when in reality, his hope is to make “his” airline, which has good margins, even more profitable

What I find interesting is that we haven’t actually seen capacity in the US market decrease that much. It’s almost like all the airlines have a “wink wink, nudge nudge” agreement to keep fares higher right now. I don’t want to suggest anything illegal is happening, or that this is official collusion, but I think the concept isn’t too far off.

However, eventually I feel like something has to give. Ultimately the way fares end up going down is because you have desperate airlines with seats to fill, and if they can undercut the other guys, those airlines often feel the need to match fares as well.

For airlines like Frontier, it’s not necessarily just about being profitable, but instead, it’s about reducing losses. If we see some airlines consistently undercutting fares of competitors, then the increases just won’t be able to stick around, as I see it.

I’m actually a little more forgiving than others of airlines raising fares, because I recognize what a tough industry it is. Many people just don’t realize how expensive it is to run an airline, and act as if they’re being taken advantage of if their flight across the country costs more than their Uber to the airport.

Bottom line

Delta has today reported its Q2 2026, and the airline saw a very healthy 14% revenue increase, largely attributed to being able to charge higher fares. While those higher fares make sense in the context of the spike in jet fuel costs, it’s the long term narrative to investors that has the biggest implications for consumers.

Delta CEO Ed Bastian indicated that the current conflict has been a “powerful catalyst for change” in the airline industry, and that the “current revenue momentum should remain sustainable” even as jet fuel prices go down.

This is a narrative we’ve heard echoed over and over by airline executives. While I know that this is how they’d like things to be, I’m curious to see how it really plays out.

What do you make of Bastian’s comments about long term airline ticket prices?