What's going on?

Delta Air Lines � America�s second-largest carrier � slashed its annual profit target by 15% on Thursday due to rising fuel costs (tweet this). Uh oh, unexpected turbulence!

What does this mean?

Delta actually delivered strong sales in its last quarter � they grew by 10%. However, the recent oil price increase is causing fuel costs to take flight � they were $654 million higher than the same time last year.


Delta expects this trend to continue and hurt its 2018 profits by adding an extra $2 billion to its jet fuel costs (Delta�s 2017 fuel bill was about $7 billion). Strong revenue growth and efficiency exercises � like cutting down on less profitable routes � isn�t enough to stop the rising cost eating into profits.

Why should I care?

For markets: A few dark and stormy days for the airline sector.

Delta�s cut to its profit target follows the world�s biggest airline carrier, American Airlines, reporting weak results on Wednesday. It�s been hit by tougher competition (which drives fares down) and higher fuel costs, causing American Airlines� shares to fall as much as 8%, and stocks in the US airline sector to drop by 3% on average. Rising fuel costs have been a cloud for all airlines, and they�re struggling to find clear air (price increases on fares typically take six to twelve months to make an impact).

The bigger picture: There�s good news flying around, too.

Norwegian Air went against the grain by turning a profit for the first time in its last quarter (albeit a �mere� $37 million), thanks to rapidly increasing sales. Its sparkling performance has attracted a lot of potential suitors, with British Airways and Lufthansa all looking to buy the low-cost challenger. Its share price has gone sky high, rising 35% since the start of March.