By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panelists agree that Delta's shift towards premium revenue and Berkshire's investment signal confidence, but they caution about near-term fuel costs, recession risks, and the upcoming Amex contract renegotiation. The 62% ancillary revenue base is seen as both a strength and a vulnerability.
Risk: The upcoming Amex contract renegotiation and potential regulatory pressure on loyalty program transparency are the single biggest risks flagged by the panelists.
Opportunity: The potential for Delta to prove its premium thesis and renegotiate favorable terms with Amex is seen as a key opportunity, but this depends on maintaining strong loyalty program performance and margin expansion.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
Berkshire Hathaway disclosed a brand-new 39.8 million-share stake in Delta Air Lines in its latest 13F filing.
Delta's premium products revenue surpassed main cabin revenue for the first time in the fourth quarter of 2025.
Higher fuel costs tied to the Middle East conflict are weighing on near-term earnings.
In May 2020, Warren Buffett told Berkshire Hathaway (NYSE: BRKB)(NYSE: BRKA) shareholders that the conglomerate had sold its entire stakes in Delta Air Lines (NYSE: DAL), American Airlines, United Airlines, and Southwest Airlines. "The world has changed for the airlines," he said at the company's virtual annual meeting, calling the original positions a mistake.
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On Friday, the conglomerate filed its first 13F under new CEO Greg Abel, who took the helm from Buffett at the start of 2026. One big surprise: an entirely new $2.65 billion position in Delta. The 39.8 million-share stake instantly makes the Atlanta-based carrier Berkshire's 14th-largest holding and a 6.1% owner of the airline.
A position this size is meaningful enough for investors to take seriously. So, is it time to follow Berkshire into the stock?
The Delta of 2020 was a passenger airline trying to fill seats during a near-total collapse in travel. The Delta of today looks materially different.
The company has spent the past several years moving away from a mass-market model and toward higher-margin revenue streams that look less like an airline and more like a brand with a loyalty engine. In the most recent quarter, Delta's diversified, high-margin revenue streams -- including premium products, loyalty, American Express remuneration, cargo, and maintenance work for other airlines -- represented 62% of total revenue and grew in the mid-teens year over year.
Premium products in particular are driving the narrative. Premium revenue rose 14% year over year in the first quarter, building on a milestone hit in the fourth quarter of 2025, when premium products revenue exceeded main cabin revenue for the first time in the company's history. Loyalty revenue grew 13%, and American Express remuneration -- the cash Delta receives from its co-branded card partnership -- topped $2 billion for the period, up 10%.
And Delta's overall results were strong. The airline's non-GAAP (adjusted) operating revenue for the first three months of 2026 hit a record $14.2 billion, up 9.4% year over year and accelerating sharply from the 1.2% adjusted operating revenue growth posted in the fourth quarter of 2025. Adjusted earnings per share of $0.64 climbed about 40% compared to the year-ago period.
"Our results underscore the power of Delta's brand and the durability of our financial foundation," said CEO Ed Bastian on the company's April earnings call.
Just as notably, main cabin unit revenue grew year over year for the first time since the end of 2024 -- a sign the recovery is finally extending beyond the front of the plane.
The Delta story, however, isn't without complications. The conflict in the Middle East has sent jet fuel prices to roughly double their year-ago levels, and Delta now expects more than $2 billion in additional fuel costs in the second quarter alone. The company is responding by trimming capacity and pushing through higher fares to recapture 40% to 50% of the increase.
One asset helping Delta navigate the shock is the company's Pennsylvania-based Trainer refinery, which turns crude into jet fuel for the airline. Management expects the operation to deliver roughly $300 million of cost relief in the second quarter -- a structural hedge that isn't available to peers.
"And while the recent fuel spike is currently impacting earnings, I'm confident this environment ultimately reinforces Delta's leadership and accelerates long-term earnings power," Bastian said on the same call.
Importantly, management said it was still early to update its full-year 2026 outlook. Its prior adjusted earnings per share guidance of $6.50 to $7.50, however, implies about 20% earnings growth at the midpoint. At a recent price of around $72, the stock trades for roughly 10 times earnings -- well below the broader market's price-to-earnings ratio multiple.
Risks remain, of course. The airline business is cyclical, and a slowdown in corporate or premium leisure travel could quickly pressure the very mix that makes the current story compelling.
But for patient investors, this looks like a reasonable spot to follow Berkshire in. The business the conglomerate just stepped into appears meaningfully more durable than the industry Buffett walked away from in 2020, and the price seems to leave room for things to go modestly wrong -- and it's an attractive enough entry point that the long-term return could be exceptional if things go well.
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American Express is an advertising partner of Motley Fool Money. Daniel Sparks and his clients have positions in Berkshire Hathaway. The Motley Fool has positions in and recommends American Express and Berkshire Hathaway. The Motley Fool recommends Delta Air Lines and Southwest Airlines. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"Delta's premium revenue mix improves durability but does not eliminate exposure to fuel volatility and macro shocks that could quickly pressure the current valuation."
Berkshire's $2.65 billion DAL stake under new CEO Greg Abel signals confidence in the carrier's pivot to 62% high-margin revenue from premium cabins, loyalty programs, and Amex fees, with Q1 2026 adjusted EPS jumping 40% to $0.64. Yet jet fuel costs have roughly doubled amid Middle East tensions, adding over $2 billion to Q2 expenses despite the Trainer refinery's $300 million offset. Guidance of $6.50-$7.50 EPS implies 20% growth at the midpoint, but the stock's 10x multiple still embeds airline cyclicality that premium shifts have only partially mitigated.
A deeper or extended fuel spike combined with any softening in corporate travel could force capacity cuts and guidance reductions, erasing the apparent discount and pressuring multiples well below 10x before the loyalty engine provides durable protection.
"Delta's valuation assumes ancillary revenue streams (62% of total) remain resilient through a downturn, but these are precisely the first casualties when corporate and premium leisure spending contracts."
The article frames this as Buffett 2.0 vindication—Delta transformed from commodity carrier to premium-focused brand. The 10x forward P/E is genuinely cheap. But the article buries a critical dependency: 62% of revenue now comes from ancillary streams (loyalty, AmEx remuneration, premium), which are structurally vulnerable to economic slowdown and competitive erosion. The Trainer refinery hedge is real but masks underlying fuel exposure. Most importantly, the article assumes premium travel durability without stress-testing recession scenarios. If corporate travel contracts 15-20%, Delta's margin story collapses faster than the 2020 collapse it survived.
Greg Abel's first major move buying airlines—a sector Buffett explicitly called a mistake—may signal either genuine business transformation or a new regime making a high-profile error to establish independence. The $2.65B size makes this hard to unwind quietly.
"Delta’s valuation is being supported by its high-margin loyalty and credit card partnership revenue, which functions as a structural hedge against traditional airline cyclicality."
The market is misinterpreting this as a 'Buffett-style' value play. Under Greg Abel, Berkshire’s pivot into Delta (DAL) at 10x forward earnings suggests a shift toward capital-intensive, infrastructure-heavy assets that benefit from the 'moat' of the American Express loyalty ecosystem, rather than pure airline operations. With 62% of revenue now tied to non-flight segments, Delta is effectively a financial services company with a flight department. However, the $2 billion fuel cost headwind is a structural volatility risk that no amount of premium cabin revenue can fully insulate against in a recessionary environment.
The Trainer refinery hedge is a temporary accounting gimmick that masks the underlying fragility of a business model still tethered to volatile, geopolitical-sensitive jet fuel prices.
"Delta's pivot to premium revenue could deliver durable upside if travel demand stays resilient and fuel costs don't derail margins."
Delta's pivot toward premium revenue and a Berkshire stamp of approval create a more durable earnings profile than the 2020 airline bust, but the story hinges on demand holding for premium and Amex recapture remaining robust. Near-term fuel spikes are a real risk, even with the Trainer refinery offset, and the stock trades around 10x forward earnings; a re-rating depends on corporate travel recovery and capex discipline. Berkshire's move might also be more about signaling than a durable ROIC engine, so expect volatility if macro travel data disappoints.
The Delta thesis could blow up if corporate travel and international demand lag expectations, or if fuel costs stay structurally high and premium pricing proves unsustainable. Berkshire may be buying a cyclical rebound story, not a durable moat.
"Amex partnership renewal poses an overlooked risk to Delta's ancillary revenue stability."
While the panel highlights fuel and recession risks to Delta's premium shift, a key unaddressed threat is the upcoming Amex contract renegotiation. If Delta loses favorable terms on card spend and miles, the 62% ancillary base could shrink materially, undermining the EPS growth guidance. This makes Berkshire's stake riskier than the 10x multiple suggests, especially under Abel's new regime.
"Amex renegotiation is a 2028 sword of Damocles, not an immediate threat—but only if Delta's premium margins hold through 2026."
Grok's Amex renegotiation risk is material, but the timing matters enormously. Delta's contract doesn't expire until 2028—three years out. That's enough runway for Abel to prove the premium thesis and potentially renegotiate from a position of strength if loyalty ARPU stays elevated. The real risk isn't the contract itself; it's whether Delta's margin expansion holds long enough to build negotiating leverage. If Q2-Q3 shows premium fatigue, Amex knows it and extracts concessions early.
"Regulatory scrutiny on loyalty program fees poses a structural threat to Delta's ancillary revenue model that outweighs the contract expiration timeline."
Claude, you’re missing the regulatory tail-risk regarding the Amex partnership. The CFPB is increasingly scrutinizing 'junk fees' and loyalty program transparency. Even if the contract is years away, regulatory pressure could force Delta to unbundle or cap the lucrative Amex remuneration long before 2028. This isn't just about corporate travel demand; it’s about the sustainability of the 'financial services' margin that justifies the current valuation. If the government targets these kickbacks, the 62% ancillary revenue model faces a structural, not cyclical, reset.
"Near-term Delta risk is fuel-cost volatility and demand softness eroding margins before any AmEx renegotiation matters, even if the 62% ancillary revenue base remains intact longer than the contract horizon."
Responding to Grok: AmEx renegotiation risk is real but not the near-term threat you imply. The bigger, more immediate issue for Delta is the fuel shock and demand cyclicality—the premium-revenue moat could widen or erode fast depending on macro travel, not just a contract term five years out. If loyalty monetization stalls or regulatory pressure trims kickbacks, the 62% ancillary base loses its cushion, not gains.
The panelists agree that Delta's shift towards premium revenue and Berkshire's investment signal confidence, but they caution about near-term fuel costs, recession risks, and the upcoming Amex contract renegotiation. The 62% ancillary revenue base is seen as both a strength and a vulnerability.
The potential for Delta to prove its premium thesis and renegotiate favorable terms with Amex is seen as a key opportunity, but this depends on maintaining strong loyalty program performance and margin expansion.
The upcoming Amex contract renegotiation and potential regulatory pressure on loyalty program transparency are the single biggest risks flagged by the panelists.