Delta Air Lines, Inc.

Record profitability & strong demand (good) - Delta reported June quarter pretax profit of ~$1.4B, EPS $1.56, and operating margin ~9%—all better than start-of-quarter guidance. - Record revenue: +14% YoY to $17.7B, driven by ~1% capacity growth and unit revenue growth +12.4%. - First half free cash flow: ~$1.4B; operating cash flow ~$4B through the first half; free cash flow ~$1.4B after ~$2.6B reinvestment.

Full-year outlook affirmed; upside supported by fuel recapture & pricing durability (good/forecast) - Delta affirmed 2026 guidance: EPS $6.50–$7.50 (+20% YoY). - Free cash flow outlook: $3B–$4B, implying 3-year cumulative FCF >$11B (per management). - Management expects return to earnings growth with double-digit operating margins in 2H 2026, supported by measured capacity and a more stable fuel environment. - Q3 expectations: operating margin 11%–13% and EPS $2.20–$2.50 (vs $1.70 last year), while costs face ongoing fuel pressure.

Fuel is the key challenge—but Delta’s model is absorbing it (bad/challenge + strategy) - Delta highlighted the highest fuel costs in its history: - Fuel expense $4.4B in the quarter, up nearly $2B YoY. - Fuel price per gallon avg ~$3.93 (including $0.11 refinery benefit, partially offset by outage impact). - Despite this, Delta claims structural advantages and fuel recapture strategy helped outcomes. - Outlook assumes all-in fuel ~$3.50/gallon (including $0.05 refinery benefit); Delta expects fuel expense ~40% higher than last year in Q3. - Investor-relevant “risk framing”: if fuel moderates or if pricing weakens, margins could still hold—but management repeatedly stresses the industry is still dealing with inflation in non-fuel and elevated fuel volatility.