Delta Will Spend $2 Billion Extra in Fuel Costs — But Still Expects a $1 Billion Profit. Here’s How.

Fuel prices took flight after the Iran war began, adding $2 billion to Delta’s quarterly costs. But the airline has a plan for a soft landing. How is that possible? Delta will cut about 3.5% of flights in the second quarter, raise fares and increase bag fees — moves CEO Ed Bastian says could recover up to half of the higher fuel costs. The airline still expects to earn a profit of about $1 billion before taxes.

The strategy is working. Delta reported $15.9 billion in revenue for the first three months of the year, with particularly strong sales of premium seats and credit card spending. The airline has raised fares twice since the war started in late February and increased bag fees by $10 for the first and second checked bags.

It also doesn’t hurt that there is still a large demand for flights despite higher ticket prices. “The demand set has been strong across all geographies, across all products, categories,” Bastian told reporters and analysts on a call. “It’s a healthy travel time.”