Delta Air Lines Adjusts Revenue and Profit Forecast Amid Weaker Demand

Delta Air Lines has revised its expectations for revenue and earnings in the first quarter of 2024, citing a downturn in domestic demand that has raised concerns within the travel sector. This adjustment follows a significant decline in the airline’s stock value, highlighting the impact of shifting consumer confidence on the aviation industry.

Forecast Adjustments

In its latest securities filing, Delta revealed that it now anticipates revenue growth of no more than 5% for the quarter ending March 31, which is a downgrade from its previous estimate of 6% to 8% growth provided in January. Additionally, the airline has lowered its adjusted earnings forecast, now estimating earnings per share will be between 30 and 50 cents, down from an earlier guidance of 70 cents to $1.

Market Response and Consumer Sentiment

The announcement, which was made after market hours on Monday, resulted in a more than 13% drop in Delta’s shares in after-hours trading, compounding a more than 5% decline from the regular trading session.

Delta’s CEO, Ed Bastian, addressed this downturn in confidence during an appearance on CNBC’s “Closing Bell,” commenting, “The outlook has been impacted by the recent reduction in consumer and corporate confidence caused by increased macro uncertainty, driving softness in Domestic demand.” He emphasized that while he does not foresee an impending recession, a pullback in bookings from both leisure and business travelers has been evident.

Safety Concerns and Their Impact

Recent safety incidents have also reportedly contributed to lower confidence among travelers. Bastian mentioned that concerns escalated following a tragic midair collision involving a regional jet and an Army helicopter earlier this year, along with a separate incident involving a Delta flight in Toronto that occurred last month.

Continued Demand for Premium and International Travel

Despite the overall decline in expectations, Delta has indicated that certain segments remain robust. The airline maintains that demand for premium travel, international flights, and loyalty revenue continues to align with its projections. This contrasts sharply with the broader market outlook, as evidenced by the declines seen in stock prices across the airline industry in response to fears of diminished consumer spending.

Industry Context and Upcoming Conferences

As Delta prepares for its presentation at a forthcoming JPMorgan airline industry conference, it will join other major carriers—including American Airlines, Southwest Airlines, and United Airlines—in updating investors about current demand trends. The industry’s recent struggles illustrate a contrast to its previous resilience in the face of challenges posed by the Covid-19 pandemic, as the market reacts to increasing evidence of a slowdown in consumer spending.

For more details on the airline industry’s performance, stay tuned as new information emerges from airline executives in the upcoming days.