Delta Air Lines has revised its first-quarter profit estimates downward, projecting a range of 30 cents to 50 cents per share, a significant reduction from the previous forecast of 70 cents to $1. The revision, attributed to weakening economic conditions, triggered a 14% drop in Delta’s stock price. CEO Ed Bastian cited a pullback in corporate spending and increased consumer uncertainty as primary factors impacting domestic travel demand.
The revised outlook reflects a slowdown in revenue growth, with Delta now projecting a 3% to 4% year-over-year increase, compared to the previously anticipated 7% to 9%. Bastian specifically noted a softening in bookings from sectors including aerospace and defense, autos, media, entertainment, and technology. These industries, typically significant contributors to Delta’s revenue, are experiencing a decline in travel spending.
The profit warning from Delta has had a ripple effect across the airline industry. Shares of United Airlines and American Airlines also experienced significant declines in after-hours trading, falling 11% and nearly 9% respectively. The S&P 500 passenger airlines index has fallen 22% in the past month, significantly more than the broader S&P 500 index. This broad decline indicates a growing concern among investors regarding the airline industry’s vulnerability to economic fluctuations.
Analysts and investors had previously considered Delta’s customer base, characterized by higher affluence and diversification, to be a buffer against economic downturns. However, the company’s revised outlook suggests that even this demographic is susceptible to the current economic uncertainty. The weakening consumer and business confidence, coupled with concerns over potential tariffs and rising prices, has created a challenging environment for the airline industry. Analysts at Deutsche Bank and Seaport Research Partners had previously issued warnings about the potential impact of economic headwinds and government spending cuts on airline profitability. Forecast revisions from other major airlines are now anticipated.
