Following on the heels of American Airlines' (NASDAQ: AAL) weaker-than-expected profit outlook for 2025 earlier this week - which saw the stock fall around 9% - three additional United States carriers have also flagged weaker-than-expected earnings forecasts.
Overall, the Dow Jones U.S. Airline Index was down around 6% before markets opened yesterday.
Citing deteriorating weather, high-profile plane crashes, and less spending by consumers and the federal government, Delta, Southwest Airlines and JetBlue have taken their cue from American Airlines and trimmed their 1Q revenue forecasts.
Based on numbers provided by United Airlines earlier this week, a 2% decline in government passengers translates to a drop of more than $1 billion in revenue.
Forecast cuts
Airlines' trimmed forecasts are in stark contrast to the start of the year when Delta CEO Ed Bastian boasted steady demand.
Delta’s shares fell 11% in post-market trading which also dragged down shares of other listed airlines.
Here are the cuts the three airlines disclosed in their regulatory filings earlier this week.
Delta cut its first-quarter projections by 40-50 cents a share. Delta also lowered its guidance for revenue growth to reflect a US$500 million reduction and for operating margin.
Southwest Airlines cut its guidance on revenue per seat mile (RASM), a key industry metric, by 3%.
JetBlue Airways is now predicting a minimum loss of 4% instead of 2% for the quarter.
Given that a drop in demand for domestic air travel is seen as a lightning rod for consumer spending, economists expect flagging economic confidence to impact other sectors.
Delta’s Ed Bastian recently reminded the market that GDP is one of the most significant factors for the airline industry.
In February he witnessed a “pretty significant shift in GDP sentiment” and in the “confidence signals that we monitor,” adding that “consumer spending started to stall.”
While Delta now sees revenue rising no more than 4% from a year ago - compared with its earlier outlook for as much as a 9% jump - the airline didn’t change its full-year outlook due to declining jet fuel prices.
In addition to a slump in consumer bookings, Bastian also noted the aerospace and defence, automobile, media, entertainment and technology industries have pulled down corporate travel.
Reversals could be short-lived
Despite weaker underlying consumer demand, most airlines remain positive about the remainder of 2025.
Based on numbers from Delta and United Airlines, softening travel spending looks limited to domestic (U.S.) flights and lower-priced fares.
At a recent investor conference, Delta and United Airlines noted that international, long haul, Hawaii and premium all remain strong.
While United didn’t revise its quarterly forecasts, the airline expects to finish the quarter at the lower end of its financial projections.
Meanwhile, United’s chief commercial officer, Andrew Nocella noted that while short-term government travel spending remains close to normal, the airline is trying to make up for weaker bookings further out.
“Our ability to refill seats as we head into the Easter and spring break time period is much better than in February or March, at this point,” said Nocella.
“So, we feel bullish as we go forward that we’ll be able to recoup some of what’s been lost.”
According to full-year global passenger market performance data from the International Air Transport Association (IATA), demand for domestic air travel rose 5.7% in 2024, outstripping capacity growth of 2.5%.
Globally, the airline industry saw record-high air travel demand, with traffic volume rising 13.6% year on year, while capacity increasing by 12.8%.
