Delta shares plunge 14% after airline slashed profit forecast: We saw companies start to pull back
Delta Air Lines 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 US economic uncertainty.The Atlanta-based airline is the first major US 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.”US consumer and business confidence has weakened over tariffs imposed by President 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 fell 11%, and American Airlines dropped nearly 9%.The S&P 500 passenger airlines index has fallen 22% in the past month, compared with a 7.5% decline in the S&P 500 index. 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....