Airline stocks and exchange-traded fund (ETF) are highly sensitive to the Iran war, mainly due to cost shocks and, to some extent, demand woes. Jet fuel is a major expense (about 20-30% of costs), and oil price spikes during conflicts in the Middle East squeeze margins. Plus, war zones force airlines to reroute, resulting in longer flights and cancellations.
US Global Jets ETF JETS has lost about 6.5% (as of April 10, 2026) since the start of the war on Feb. 28, 2026. However, with truce hopes emerging, the fund has recovered over the past month and advanced about 5% (as of April 13, 2026). The fund also gained 4.3% last week.
Note that the peak of the war included the final month of the first quarter. Hence, we should delve a little deeper into earnings releases of airline companies to get cues for the upcoming quarters’ results.
Inside Delta Airlines’ Earnings
Delta Air Lines DAL last week reported a strong first quarter for 2026, with both earnings and revenues surpassing market expectations, reflecting steady travel demand and improved pricing.
Adjusted earnings, excluding non-recurring items, came in at 64 cents per share, ahead of the consensus estimate of 61 cents and up 39.1% from the year-ago period. Adjusted revenues totaled $14.2 billion, also beating forecasts and increasing year over year.
The load factor improved slightly to 81.6%, indicating better seat utilization. Pricing metrics were also encouraging, as passenger revenue per available seat mile and passenger yield both increased 6%, while total revenue per available seat mile rose 8.2%.
Passenger Segment Drives Growth
The airline’s performance was primarily fueled by its passenger business, which contributed 77.5% of total revenues. Passenger revenues rose 7%. Domestic unit revenues increased 6%, while international unit revenues grew 5%, led by transatlantic routes – Delta’s most profitable international segment.
Importantly, the March quarter marked the first full quarter of positive main cabin unit revenue growth since late 2024, highlighting improving fare conditions. Corporate travel also remained a bright spot, registering double-digit growth.
Cargo and Ancillary Revenues Add Momentum
Delta’s cargo revenues climbed 9% year, reflecting improved freight demand. Meanwhile, other revenues surged 41%, providing a meaningful boost to the overall top line.
Rising Costs: A Wall of Worry?
Despite strong revenue growth, higher costs continued to pressure margins. Fuel costs were another headwind, with average fuel prices rising 12% to $2.78 per gallon, even as fuel consumption edged up just 1%. With the Iran war causing turmoil in the energy market, such pressures are less likely to subside anytime soon (read: Fuel Prices to Stay High for Long? Airlines ETFs in Focus).
Non-fuel unit costs also increased modestly, reflecting ongoing inflationary pressures. Total operating expenses rose 14%. Delta’s salaries and related costs increased 11%, largely due to higher wages following the pilot contract ratified in 2023.
What Lies Ahead for Airlines Companies in Q2?
Looking ahead, Delta issued a cautious outlook for the second quarter of 2026. The company expects adjusted earnings per share in the range of $1.00 to $1.50, below the current consensus estimate of $1.88. The guidance assumes higher fuel costs, with prices estimated at around $4.30 per gallon.
United Airlines UAL declared in late March that it is trimming more unprofitable routes over the next two quarters as it braces for a prolonged surge in jet fuel prices due to the Iran war, as quoted on CNBC. The move comes even as strong travel demand has enabled U.S. carriers to raise fares.
Note that U.S. airlines are particularly susceptible to fuel spikes as most do not hedge fuel costs, unlike many European and Asian peers. Instead, they rely on fare hikes and capacity adjustments to manage rising expenses, the same CNBC article went on to highlight.
While U.S. airlines continue to benefit from resilient travel demand and improved pricing power, rising fuel and labor costs remain key challenges. The sector’s near-term performance will likely depend on its ability to navigate cost pressures in a still uncertain macro environment.
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This article originally published on Zacks Investment Research (zacks.com).