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Amid Uncertainties, Delta CEO Ed Bastian Warns Oil Crisis Could Reshape Airline Industry

"We woke up this morning with a very different set of fuel assumptions than we had when we went to bed," Bastian said on the earnings call this morning after the U.S. and Iran agreed a two-week ceasefire yesterday.

Like many airline executives, Delta CEO Ed Bastian has been forced to respond to the ongoing oil crisis caused by the Iran war by raising fares and cutting flights. But he sees bigger changes on the horizon. Sustained fuel price hikes could lead to sweeping restructuring across the aviation industry, Bastian said during Delta’s first-quarter earnings call today (April 8).

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“Over my career, I’ve seen many periods of disruption in this industry,” said Bastian, who has been CEO for a decade and has helped the airline navigate crises like 9/11, bankruptcy and the COVID-19 pandemic throughout his 30 years with the company. “Time and again, high fuel prices have been the most powerful catalyst for change: separating the winners, and forcing weaker players to rationalize, consolidate or be eliminated.”

Jet fuel prices have roughly doubled since February, when the U.S. war with Iran led to the closure of the Strait of Hormuz, a vital route for global oil exports. The surge added about $330 million in costs for Delta during the January-March quarter, the company reported, with an additional $2 billion expected over the next three months.

A two-week ceasefire announced yesterday (April 7) between the two nations has offered relief, with Iran agreeing to reopen the Strait of Hormuz as part of the deal. Airline stocks rallied in response: Delta shares jumped nearly 6 percent today, while American Airlines and United Airlines rose by around 7 percent and 10 percent, respectively.

Investors also welcomed Delta’s positive quarterly results. Revenue climbed 9.4 percent year-over-year to $15.9 billion. Although the company reported a net loss of $289 million, its adjusted profit reached $420 million, up 45 percent from last year.

Still, Bastian cautioned that volatility is far from over. “We woke up this morning with a very different set of fuel assumptions than we had when we went to bed,” he said, predicting that prices will ultimately stabilize at higher levels.

To manage the turbulence, Delta plans to reduce capacity growth by about 3.5 percent next quarter and announced fee hikes for checked luggage—$10 more for the first two bags and $50 more for a third—following similar moves by United and JetBlue.

One strategic advantage for Delta is its oil refinery near Philadelphia, purchased in 2012, which is expected to yield roughly $300 million in financial benefits this quarter.

Even with that buffer, Bastian warned that the entire airline industry faces structural change. He pointed to the late 2000s and early 2010s—an era of high fuel prices that spurred major consolidation, including Delta’s 2008 acquisition of Northwest. “I anticipate higher fuel prices will cause much more significant structural reform,” said the executive.

Despite the turbulence, Bastian remains optimistic about demand from affluent travelers. Consumers shaken by the Trump administration’s tariffs and its recent Middle East conflict have largely maintained their travel plans. “The higher-end consumer, the premium consumer, is candidly immune or becoming immune to the headlines,” he said.

SEE ALSO: From Oil Reserves to Data Control: The Rise of Digital Self-Reliance

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