- Delta's shares drop 14% after profit forecast cut
- Economic uncertainty impacts Delta's domestic travel demand
- Analysts warn of revenue estimate risks for airlines
CHICAGO, March 10 (Reuters) - Delta Air Lines (DAL.N)
, opens new tab on Monday slashed its first-quarter profit estimates by half, sending its shares down 14%, and its CEO said the environment had weakened due to U.S. economic uncertainty.
The Atlanta-based airline is the first major U.S. carrier to report that mounting economic worries among consumers and businesses are hurting domestic travel.
"We saw companies start to pull back. Corporate spending started to stall," CEO Ed Bastian told CNBC. "Consumers in a discretionary business do not like uncertainty."
U.S. consumer and business confidence has weakened over tariffs imposed by President Donald Trump and threats of additional levies, and increasing concerns about higher prices. The Atlanta Federal Reserve's closely followed GDPNow tracker suggests the economy could shrink in the first three months of the year.
Since travel spending closely tracks broader economic activity, investors and analysts say a downturn would spell trouble for the airline industry. Carriers' revenue from government has already taken a hit due to a crackdown on federal spending.
Delta now expects a profit in the range of 30 cents to 50 cents a share, compared with previous estimates of 70 cents to $1 provided in January.
Analysts at Jefferies said a cut to Delta's earnings estimate was anticipated, but the magnitude is more severe.
Airline stocks, already hit by Monday's broad selloff, were routed in after-hours trading. Delta shares lost 14%, while United (UAL.O)
, opens new tab fell 11%, and American Airlines (AAL.O)
dropped nearly 9%.
A Delta Airlines commercial aircraft flies over Washington as it approaches to land at Dulles International Airport
The S&P 500 passenger airlines index (.SPLRCALI)
, opens new tab has fallen 22% in the past month, compared with a 7.5% decline in the S&P 500 index (.SPX)
. Delta's shares have declined 24% in the last month.
Investors and analysts had suggested that Delta's more affluent and diversified customer base meant it was better-positioned to deal with weaker demand. But Bastian said the company was seeing softness in booking from the aerospace and defense, autos, media, entertainment and tech industries.
OUTLOOK REVISION
Forecast revisions are expected from other airlines as well.
In a note this month, analysts at Deutsche Bank warned that an emerging economic "soft patch" had put a question mark on the industry's revenue estimates.
And last week, Seaport Research Partners cut its 2025 pre-tax profit estimates for Delta, United, American and Southwest Airlines (LUV.N)
, opens new tab, saying the carriers factored neither a full-blown trade war nor a sharp cut to government spending into their 2025 outlooks.
Several carriers will make presentations on Tuesday at a JPMorgan industry conference.
Delta said it now expects its first-quarter revenue to grow 3% to 4% year-on-year, slower than the 7% to 9% increase in its prior forecast.
A key economic adviser to Trump on Monday pushed back on talk of recession, saying there were many reasons to be bullish about the U.S. economy. But a report from the Federal Reserve Bank of New York on Monday showed American households growing more pessimistic about their prospects.
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Reporting by Rajesh Kumar Singh, Additional reporting by David Shepardson in Washington; Editing by David Gaffen and Bill Berkrot
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