Delta Air Lines Stock Drops Following Revised Profit Forecast
Delta Air Lines made headlines when it announced a significant reduction in its profit forecasts for the first quarter, cutting estimates by 50%. This announcement led to a substantial drop in its stock prices, with shares declining by 14%. CEO Ed Bastian attributed this downturn to a weakening economic environment in the US, making it clear that both consumers and businesses are becoming more cautious about travel.
As the first major US airline to report such drastic changes due to economic factors, Delta’s situation reflects broader concerns. According to Bastian, companies are beginning to reduce spending, and consumers are hesitating to travel when faced with uncertainty. “We saw companies start to pull back. Corporate spending started to stall,” he stated in an interview with CNBC. The CEO pointed out that when consumers perceive an unstable economic climate, they tend to become conservative with discretionary spending, particularly on travel.
The outlook for US consumer and business confidence has dimmed recently due to various factors. Tariffs imposed during the Trump administration and the looming threat of additional tariffs are contributing to a general sense of unease. An increase in prices is also a concern for many Americans, which has prompted a rethink of spending habits. The Atlanta Federal Reserve’s GDPNow tracker indicates a possible contraction in the economy during the first quarter, raising alarm bells for industries sensitive to economic fluctuations, including airlines.
Air travel spending typically parallels broader economic activity. Experts warn that a downturn could have dire consequences for airlines. Revenue received from the government has already dipped following changes in federal budget policies, indicating other challenges ahead for Delta and its competitors.
In terms of financial expectations, Delta is now forecasting earnings between 30 to 50 cents per share, a sharp drop from its previous guidance of 70 cents to $1 given in January. Analysts at Jefferies had anticipated some revision but noted that the scale of Delta’s adjustments was more severe than expected. The airline sector felt the impact of Delta’s announcement immediately, with other airlines like United and American Airlines also seeing their shares fall significantly.
The S&P 500 passenger airlines index has plummeted by 22% in the last month, in contrast to a 7.5% decrease in the overall S&P 500 index. Delta’s stock alone has experienced a 24% decline within the same timeframe. Initially, investors had assumed that Delta’s diverse and wealthier customer base would position it favorably amid weaker travel demand, yet the CEO noted recent declines in bookings specifically from sectors like aerospace and defense, automotive, media, entertainment, and technology.
Other airlines are likely to follow suit with their own profit forecasts. Deutsche Bank analysts recently cautioned that the emerging economic “soft patch” puts the industry’s revenue estimates in doubt. Additionally, Seaport Research Partners adjusted 2025 earnings expectations for major airlines, indicating that existing forecasts did not fully consider the impacts of potential trade wars or significant cuts in government spending.
On a related note, Delta’s first-quarter revenue is now projected to grow between 3% and 4% year-over-year, which is significantly slower compared to their previous forecast of 7% to 9%. A key economic advisor to Trump attempted to shift the narrative by claiming that there are still many reasons to remain optimistic about the US economy. However, a report from the Federal Reserve Bank of New York revealed that American households are becoming increasingly pessimistic about their financial futures, adding to the complex economic landscape airlines will need to navigate moving forward.
Several airlines are set to present at an upcoming industry conference hosted by JPMorgan, where more insights regarding the challenges facing the airline sector may arise.
