Delta's 24% guidance cut qualifies its CEO's claim that a $1.6 billion fuel bill did not dent profit

Third-quarter revenue of $17.6 billion, up 16%, implies a year-earlier quarter of about $15.2 billion and an increase of roughly $2.4 billion ^[18][6]. Jet fuel cost $1.6 billion more over the same quarter ^[2]. The remaining $0.8 billion or so has to cover everything else that grew, and Fortune's account does not itemize those costs ^[19].

Bastian was speaking about a quarter. "To not dent those profits, to me is incredible," he told CNBC ^[3]. He added: "In past cycles, past shocks, if we saw a 60% increase in fuel prices, we'd be flat on our back." ^[4]

The outlook covers the year. Its midpoint fell from $7.00 a share to $5.35, a drop of $1.65 ^[20][8]. Fortune gives no reason for the cut, and does not report whether the third quarter reached the close to 100% Bastian expected. July's figures suggest one candidate. If Delta was passing along 60% of the added fuel cost then, 40% was not recovered ^[5][21], and a year that starts with a gap that size can miss even when its third quarter holds.

On persistence, Bastian's case has two parts. The first is that buyers have accepted the prices: he said on the earnings call that the market has accepted these price points and that, with airfare still reasonably affordable in Delta's view, its position is very sustainable ^[23]. The second is that fuel falls from here. "Hopefully, we will see fuel recede into the next year at some point, and that's when I think you'll see the real earnings power of this franchise be amplified," he said ^[22].

The demand evidence so far supports the first part. Ticket prices are up about 23% from a year ago, according to the U.S. Travel Association ^[12], and Southwest CEO Bob Jordan told CNBC in July: "Despite high fuel and high prices, we're seeing really strong demand." ^[17]

In Bastian's case, demand holds and fuel eases, and the gap between added revenue and added fuel widens. Demand softens first, while Gulf Coast jet fuel is still $4.34 a gallon against $2.19 a year earlier, according to CNBC ^[14], and the squeeze arrives from the revenue side. Or fuel falls and rivals discount to fill seats, so fares follow costs down. We think the first is likeliest through the next quarter or two, because buyers who absorbed a 23% increase are unlikely to leave all at once ^[12]. We would call the thesis wrong if fares fall as fast as Brent does.