Q2 in the U.S. is developing into a clear story: fuel is up - fares are upper.

Delta’s Q2 earnings were released last week, and what was widely expected after Allegiant guided a 23% increase in overall revenue per seat-mile happened. For Delta, the numbers were as expected and phenomenal.

First the bad: fuel was up 67%. Ticket revenues were up 13%.

Sounds terrible, right? It’s not. In fact, it’s downright spectacular.

Last year, fuel was responsible for just over 18% of Delta’s overall operating expenses (not including refinery) - $2.5 B. Passenger revenues, though, represented 89% of all revenues - $13.9 B.

It doesn’t take as much of a move in fares to cover the cost of fuel. The hard part is in getting passengers to pay those extra fares. In Q2, they did. (Also in Q2, the lowest-fare airline in the Southeast United States disappeared.)

But the 13% increase in ticket revenues is spectacular. So spectacular, in fact, that I was called crazy last year for saying an increase of 10% was possible. (In fairness, whether revenues can increase by double digits and whether I’m crazy are not mutually exclusive)

We can see how the increased revenues were managed by the increased costs by building the trusty waterfall chart starting in Q2 2025 and reconciling the differences in Q2 2026. Operating profit was down 11%. But, purely from a fuel-up perspective, the increased revenue covered it. It was the other increases, notably salaries, that made the difference.

From a more top-down perspective, one could make the argument that salaries and other expenses are always up, so the differentiator was fuel - though I think that normalizes the notion that an 8% increase in total labor costs for only 1% growth is a good thing. When normalized for the reduction in profit sharing, though, it moderates to a 4.5% increase.

Still, other costs continue to go up at a rate higher than the airline is growing. It’s not a problem - it’s just where I would point to for the $238 million drop in operating profit, not necessarily fuel. A practice in hair-splitting, but still good context.

Of course, many other line items moved compared to this time last year, so we’ve built our trusty year-over-year income statement reconciliation waterfall that connects net income to net income. It should be noted that the refinery revenues and expenses are excluded from this chart. It should also be noted that refinery revenues and expenses are the same by Delta’s accounting, so it just removes an unnecessary blue bar and a tan bar of exactly the same length. The MRO business is considered ancillary and is still included.

Whichever way you slice it, this was an incredible quarter for Delta. Sure, operating profits were down, but I can’t remember the last time this industry has seen pricing power so strong as to drive 13% ticket revenue growth on 1% capacity growth. Simply stunning, and a metric likely not limited to Delta.

Which re-begs the next question - any bets on whether airlines will return that pricing power when fuel goes down?

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