Delta Air Lines (DAL.N) pulled its financial forecast for 2025 and projected current-quarter profit below expectations on Wednesday, saying travel demand has "largely stalled" as sweeping U.S. tariffs fuel economic uncertainty.
U.S. consumer and business confidence have taken a beating as President Donald Trump's tariffs on imports from most of the world raise the specter of higher inflation and slower economic growth. Global brokerages have also lifted their odds for a recession.
With travel a discretionary item for many consumers and businesses, growing risks of a downturn have clouded the airline industry's outlook and sparked a selloff in shares.
"With broad economic uncertainty around global trade, growth has largely stalled," Delta CEO Ed Bastian said in a statement. "Given the lack of economic clarity, it is premature at this time to provide an updated full-year outlook."
It's a dramatic reversal from January when Delta had forecast record profits for this year. In a CNBC interview, Bastian said the economy would continue to lose steam until the tariffs-induced uncertainty was resolved.
CAPACITY CUTS, COST CONTROL
With demand slowing, U.S. airlines have started culling flights to avoid lowering fares and protect margins.
Delta said on Wednesday it was reducing its planned capacity growth in the second half of the year to flat from a year ago. It previously expected to grow capacity by 3% to 4%.
Bastian said the airline was preparing for a recession by "actively" managing costs and capital expenditures. "In this slower-growth environment, we are protecting margins and cash flow by focusing on what we can control," he said.
Savi Syth, an analyst with Raymond James, said Delta's measures to protect its profits will likely be viewed favorably by investors.
The airline's shares, which have lost 36% this year, were up 8% at $38.86 in morning trade. The broader NYSE Arca Airline index (.XAL), which has declined 30% this year, was up about 2%.
Delta forecast a profit of $1.70 to $2.30 a share for the quarter ending June. The midpoint of the forecast is $2 per share, compared with analysts' average estimate of $2.30, according to data compiled by LSEG.
Underscoring the uncertainty, the company said its total revenue for the second quarter would range from 2% lower to 2% higher than a year ago.
SOFTENING DEMAND
Bookings from both leisure and corporate customers have softened, hitting demand for domestic travel, it said. Demand for premium and international travel, however, has remained resilient.
The airline reported an adjusted profit of 46 cents a share for the first quarter, compared with the 38 cents anticipated by analysts. Last month, the company slashed its March-quarter profit estimate by half on mounting economic worries.
Delta was the first major U.S. carrier to report its earnings. United's first-quarter results are due on April 15.
Analysts expect similar commentary from Delta's rivals. Major carriers last month cut their first-quarter earnings estimates, saying rising economic uncertainty has led to a pullback in corporate and consumer spending.
Some indicators are signaling more pain ahead. Air tickets sold through third-party online travel agencies for summer travel to Europe are down about 13% from a year ago, according to aviation analytics firm Cirium.
"The airline sector is in the eye of the storm," TD Cowen's Tom Fitzgerald said in a note.
