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Delta Air Lines Adjusts Outlook Amid Uncertain Market Conditions
On June 19, 2024, Delta Air Lines aircraft were noted at Seattle-Tacoma International Airport, marking a pivotal moment for the airline as it reassesses its operational strategies.
As the airline navigates a landscape of shifting consumer and corporate travel demand, CEO Ed Bastian recently indicated that Delta will not pursue an expansion of its flight capacity in the latter half of 2025. This decision comes in light of disappointing bookings linked to the current trade policies of the Trump administration, which Bastian has criticized as “the wrong approach.”
In its latest financial forecast, Delta projects second-quarter revenues to either decline by up to 2% or potentially increase by up to 2% compared to the previous year. This stands in contrast to Wall Street’s expectations for a 1.9% growth. Additionally, the airline anticipates adjusted earnings per share to fall between $1.70 and $2.30, reflecting a downward revision from analysts’ prior estimates of $2.23 per share.
Furthermore, Delta has refrained from reaffirming its 2025 financial guidance just a month after initially offering positive targets during an investor conference. This shift follows a reduction in its earnings outlook for the first quarter, attributed to weaker-than-expected demand for both corporate and leisure travel.
The airline’s cautious approach marks a significant change for Delta, traditionally viewed as the most profitable airline in the U.S. At the beginning of 2025, the airline was optimistic about sustained travel demand. However, a decline in both consumer and corporate confidence has led to a more conservative forecast, as expressed by Bastian in a recent interview with CNBC.
“In the last six weeks, we’ve observed a notable drop in consumer and corporate confidence,” he noted, adding that while travel demand was robust in January, a notable slowdown began in mid-February. This sentiment has led Wall Street analysts to lower their earnings expectations and price targets across the airline industry due to these emerging trends.
Bastian acknowledged that bookings from the main cabin are not meeting previous expectations, further compounded by companies reevaluating their travel policies amidst government workforce reductions and economic fluctuations. Nonetheless, he pointed out that international and premium travel segments have shown relative resilience.
Initially, Delta planned to increase its flying capacity by 3% to 4% in the latter half of 2025; however, this goal has been revised to maintain flat capacity year over year.
“Given the widespread economic uncertainties surrounding global trade, our growth has effectively stalled,” Bastian detailed in an earnings release. “In this environment of slower growth, we are focused on safeguarding our margins and cash flow by concentrating on controllable factors.”
As the first major U.S. airline to disclose its earnings this quarter, Delta sets the tone for its competitors—United, American, Southwest, and others—who are poised to report their financial results in the coming weeks.
The company reported its performance for the three months concluding on March 31, with adjustments made to align with market expectations based on consensus estimates from LSEG:
Earnings per share: 46 cents adjusted, compared to an expectation of 38 cents. Revenue: $12.98 billion adjusted, while the anticipated figure was $13.02 billion.
In the first quarter, Delta’s net income surged to $240 million, a significant increase from $37 million reported in the same period last year, with revenue climbing 2% year over year to $14.04 billion.
Upon excluding revenue from Delta’s refinery sales, the airline achieved adjusted earnings per share of 46 cents—reflecting a 2% increase from the previous year and surpassing analysts’ expectations. Adjusted revenue of $12.98 billion also indicated a 3% year-over-year increase, aligning closely with market forecasts.
Source
www.cnbc.com