Delta Air Lines has long led the US airline industry when it comes to profitability, and in recent years, it seems like there have been no signs of the good times ending. Well, that’s finally starting to change, and some cracks are forming…
In this post:
Delta cuts earnings guidance, stock tanks
Delta has just slashed its earnings and revenue guidance for the first quarter of 2025, ahead of a Tuesday morning presentation at the JP Morgan Industrials Conference. The reason?
“The outlook has been impacted by the recent reduction in consumer and corporate confidence caused by increased macro uncertainty, driving softness in Domestic demand.”
With this updated guidance, Delta has cut its first quarter revenue growth forecast to 3-4%, less than half its earlier forecast of 7-9%. Furthermore, the airline has adjusted its forecast for adjusted earnings to 30-50 cents per share, compared to the earlier forecast of $1 per share.
With this update, the airline expects a first quarter operating margin of 4-5%, compared to the earlier forecast of 6-8%. However, the airline notes that “premium, international and loyalty revenue growth trends are consistent with expectations and reflect the resilience of Delta’s diversified revenue base.”
Delta’s stock is tanking in after hours trading, and as of the time of this post, shares are down over 14% (and they’ve already dropped around 25% over the past month).
As you’d expect, other airlines are impacted as well, since this has implications for the entire industry. In particular, United is viewed as Delta’s biggest competitor nowadays, and the carrier’s shares are down 11%.
Is this a bump in the road, or more serious than that?
I’ll let everyone decide for themselves why consumer confidence might be sinking. I mean, I have some theories, but we live in a world where everyone has their own reality, so I don’t want to impose my beliefs on others.
Airlines like Delta and United have been incredibly resilient in recent years. Despite the drop in business travel, the airlines have seen strong demand for premium, international, and leisure travel, plus have had strong revenue for their loyalty programs, and that’s why they’ve been reporting record revenue and profits. There has basically been no sign of that slowing down… until now.
So one wonders, is this just a temporary bump in the road due to [insert what you think is causing this], or is this the start of a bad time for the airline industry?
The airline industry has of course dealt with massively rising costs (especially with labor), so they need a lot more revenue to even cover their costs. In the United States, even the most profitable airlines basically just break even on flying passengers (since the cost per air seat mile and revenue per air seat mile are roughly comparable), and make most of their profits through other means, like their loyalty programs.
There’s only so much upside with loyalty programs, so if consumer confidence continues to decrease, it’ll be even worse news for other airlines, which don’t have loyalty programs that are quite as lucrative.
Bottom line
Delta has updated its guidance for the first quarter of 2025, and it’s bad news. Projected revenue growth and earnings have both been more than slashed in half, which isn’t good. The airline blames this on a reduction in consumer and corporate confidence, caused by increased macro uncertainty.
What do you make of Delta’s updated earnings guidance, and how do you see this playing out for the industry?
Sure, earnings are falling and the stock market has given up all gains since October, but at least things are getting more expensive now that we have tariffs. Plus we have more measles than we've had in long time and RFK is going to help people pick food that will prevent measles, and we are finally slashing employment at the FAA, National Parks, Social Security, VA, and all these other agencies that people have been...
Sure, earnings are falling and the stock market has given up all gains since October, but at least things are getting more expensive now that we have tariffs. Plus we have more measles than we've had in long time and RFK is going to help people pick food that will prevent measles, and we are finally slashing employment at the FAA, National Parks, Social Security, VA, and all these other agencies that people have been trying to eliminate for decades. Keep the stupid factory running. Do not stop. The last thing I want to see is a pause to this idiocy. Keep it up for 4 years. This guy has been a joke since the 1980's. No rationale, words or facts will ever reach the acorn brained people who watched the Apprentice and thought it was real. Only personal suffering will. More. Keep it coming.
Hey, quick question for those who voted for Trump: Are you better off now than you were a year ago?
Unless FA's stop saying "this flight is completely full, take your bags off of the seats and do not put your personal item in the overhead bin", I ain't believing this. People are about to be flush with tax return money and will be spending it.
Lounges are bursting at the seams and premium cabins are full.
I’ve been on quite a few not so full flights lately.
Front cabin could all be upgrades.
The economy has been stagnant for a while….better part of 18 months.
The quality of jobs was an issue for that long. Most job growth was shown to be part time at a full expense to full time work.
Layoffs have been happening for a while. It takes a while to people to run through thier cushion until they have to make hard decisions. Which travel is the first to go.
The...
The economy has been stagnant for a while….better part of 18 months.
The quality of jobs was an issue for that long. Most job growth was shown to be part time at a full expense to full time work.
Layoffs have been happening for a while. It takes a while to people to run through thier cushion until they have to make hard decisions. Which travel is the first to go.
The economy hit the iceberg early last year. It takes a while for the ship to take on enough water to have the violins stop playing.
Trump also stopped the public money bailouts which forced public agencies to finally make the deep cuts they needed to be financially solvent (like transportation systems).
So it’s not all Trump. We have been living beyond our means for 5 years now. The music has to stop.
Finally here we are. I always get nervous when a company like delta proclaims they will always be profitable and are arrogant.
“We have been living beyond our means for 5 years now.”
Is that really what you think? Five years?
Welcome to the President Musk recession.
The RWNJs own this one.
Thanks to Eliot, WN hasn't been competitive on price in many months. DL & UA responded in kind and now consumers are saying no, no, no. Def a left field take.
You voted for this economy, Trumptards
Delta is the bellwether for the industry. Others will guide as bad or worse.
AA and UA have already cited weaker government travel but this much weakness in consumer demand was not expected this soon.
The implications for the rest of the industry and those LCCs and ULCCs that are trying to turn themselves around are very significant
"Delta is the bellwether for the industry. Others will guide as bad or worse."
Always nice to get your delta dogma on the record. But let's be clear, it isn't a bad guide in any normal year, it's rather a significant change in previous guidance for Delta. We already know some other guides are worse in absolute terms. That's a pretty useless thing to say and a simplistic way to look at this change...
"Delta is the bellwether for the industry. Others will guide as bad or worse."
Always nice to get your delta dogma on the record. But let's be clear, it isn't a bad guide in any normal year, it's rather a significant change in previous guidance for Delta. We already know some other guides are worse in absolute terms. That's a pretty useless thing to say and a simplistic way to look at this change in guidance.
The "delta for Delta" in guidance... vs AA and UA. That's where the news is.
And i'm not suggesting I have a crystal ball either. But let's set the correct comparisons. Other carriers may or may not have been as optimistic with future earnings as Delta.
This is where network strength matters the most. A robust network will be more rigid and immune to fluctuations in demand and retain stronger pricing. ULCCs and LCCs will certainly suffer because of that. Among the big 3 carriers, we shall see what happens.
They were. See what UA said vs will say.
Very bad news for AA and WN
Others could be even worse
Yes the delta is eye opening for Delta
Will be much worse for other carriers
"Very bad news for AA and WN"
Perhaps. But it would be the first economic downturn where having more international exposure vs domestic was a better thing. Delta is seeing more domestic pressure because it's the first quarter and international is at the normal winter lows already.
But, sure, in terms of ability to absorb lower margins, sure, AA is exposed, but I doubt Delta and, in particular, United's international exposure will be a good...
"Very bad news for AA and WN"
Perhaps. But it would be the first economic downturn where having more international exposure vs domestic was a better thing. Delta is seeing more domestic pressure because it's the first quarter and international is at the normal winter lows already.
But, sure, in terms of ability to absorb lower margins, sure, AA is exposed, but I doubt Delta and, in particular, United's international exposure will be a good thing if this turns out to be a full year trend.
They'll likely be asked about 2Q and 3Q tomorrow.
Maybe if their prices weren't so exorbitant they could get a bit more business.
This. I'm PM on the way to DM this year already and their delusions of grandeur as a "premium" airline are so laughable. Are they marginally better than AA and UA? Subjectively, sure. But I have a flight JFK-BCN in two weeks and the upgrade to D1 for a >7-hour flight is $3500. That's $500/hour for the A339 "suite" and access to the D1 lounge. I'm forced to fly DL for work but even that's...
This. I'm PM on the way to DM this year already and their delusions of grandeur as a "premium" airline are so laughable. Are they marginally better than AA and UA? Subjectively, sure. But I have a flight JFK-BCN in two weeks and the upgrade to D1 for a >7-hour flight is $3500. That's $500/hour for the A339 "suite" and access to the D1 lounge. I'm forced to fly DL for work but even that's tanking soon even though it's our preferred airline. I work at a FAANG with lots of US FedGov contracts and DOGE has put a stop on a lot of travel for our customers. Which means we don't travel. Colleague had to go to Germany a couple of weeks ago. Gov't sponsor wasn't able (DOGE mandate) so we picked up the slack on their behalf. Required a Sr. VP to approve two people for three days. Delta needs to get their act together. But part of me can't wait for the Schadenfreude when they realize they're still a garbage carrier *and* nobody is paying their stupid high fares...even contracted ones with industry.
orange_i_did_that_sticker.jpeg
From a purely economic and apolitical standpoints, Trump administrations policies are largely inflationary. The economy was doing well at a macro-level before, these changes have taken it off this course.
Ed is not wrong about these factors.
I don’t know what part of the economy your in. But out west. There are commercial real estate vacancies of 40 percent. Plus the space they want to sublease.
This economy has not been ok for a while.
Trump stopped the public bailouts of agencies living beyond what’s responsible. Hence the sudden stop.
If this is just the first quarter that they are warning about, which was largely booked long before the economic turmoil, it does not appear to bode well for future quarters that are being booked right now
I know we are winning because I have been told we are, but this winning sure doesn't look like I thought it would
This isn't just a Delta problem. A downturn in travel (and overall economy) is right around the corner.
Maybe don't spend money going to the Olympics and on Tom Brady ads then? Maybe Tim owns enough stock to impact the company's decisions at this point with a BOD vote.
Hi Ben, how about sharing your first impressions of the Park Hyatt Niseko?
This must be the business-friendly environment Ed Bastian was talking about last November when he was expressing his satisfaction with the election results
He would, and should, say that regardless of who wins. No business leader would insult the incumbent president unless they were asking for trouble.
He didn't have to say anything - "silence is golden".
There's a difference between insulting the (I believe you meant to write "incoming" not "incumbent") President, vs constantly pining for the change that we now have, before was electorally had it.
prayers up for you know who's net worth right now. what do we think his net worth allocation is towards Delta? 85%? 90%?
There’s a lot of economic uncertainty right now and I think people are going to try to hold onto their cash rather than book trips. The recent spate of accidents and near misses (I am quite aware it is not a trend, but a blip) also has even non-fearful fliers thinking twice. It looks like travel demand will be softer this year at least through the beginning of summer and this is reflected in their...
There’s a lot of economic uncertainty right now and I think people are going to try to hold onto their cash rather than book trips. The recent spate of accidents and near misses (I am quite aware it is not a trend, but a blip) also has even non-fearful fliers thinking twice. It looks like travel demand will be softer this year at least through the beginning of summer and this is reflected in their updated earnings forecast. Other airlines will probably have similar remarks in the coming days.
My best bet is we will see people book trips closer to come and closer to departure.
Unfortunately I think the business community is at the beginning of the sowing portion of the reaping/sowing cycle. Lots of people — big business included — say "take [redacted] seriously, but not literally!" as a way to make themselves feel better about this person's volatile beliefs, but the guardrails are off now and the seriously/literally are the same thing and we're now doing a speedrun towards stagflation. Good luck everyone!
will be interesting to see what AA and UA push out to investors vs previous guidance.
Delta hubris would be nothing new nor would blaming that hubris on something other than themselves.
Personally, I think there will be a significant slowdown or even a recession within the next 3-4 quarters, but Delta's late February and March results must be pretty disastrous vs previous guidance to influence the first quarter so late in the...
will be interesting to see what AA and UA push out to investors vs previous guidance.
Delta hubris would be nothing new nor would blaming that hubris on something other than themselves.
Personally, I think there will be a significant slowdown or even a recession within the next 3-4 quarters, but Delta's late February and March results must be pretty disastrous vs previous guidance to influence the first quarter so late in the game when you consider the math to change in the last 59 days without any update since January 10th with this material change in guidance.
They've been at other investor conferences since January 10th where they could've updated guidance.
But again, will be interesting to see how AA and UA change guidance and who had better conservatism in their January guide.
I think the corporate confidence piece is the bigger issue. Can’t do business when the administration changes its mind every half hour and feels like it needs to dominate the news flow with noise and nonsense. Business travelers will just stay home
And businesses stop CapEx spending (meaning no growth) because of too much uncertainty.
Mentioned this above but we are 100% experiencing that. DOGE restrictions for USG customers means a lot of DIB companies are following suit. If the customer can't travel, there's usually not a lot of need for us to travel, either. Conferences, planning sessions, working groups, etc. Teams held up through Covid, it will during this uncertainty as well. My company's travel policy was just updated to near-Covid stipulations: VP or CxO approval for any foreign...
Mentioned this above but we are 100% experiencing that. DOGE restrictions for USG customers means a lot of DIB companies are following suit. If the customer can't travel, there's usually not a lot of need for us to travel, either. Conferences, planning sessions, working groups, etc. Teams held up through Covid, it will during this uncertainty as well. My company's travel policy was just updated to near-Covid stipulations: VP or CxO approval for any foreign travel, and all domestic travel is for internal meetings only that can't be done online. DL is our preferred carrier. Waiting for the Dildo of Justice to work its magic on DL for their egregious pricing.
This is temporary. Cutting government spending is reducing short term growth but increasing long term growth potential.
Therefore Doge should do its job and from next year or the year after that we can expect sustainable economic growth.
LOL. Pass me some of that kool-aid bro
Exactly how the Chinese people thought about the CCP...
Need some new knee pads for your time with Elon and Trump, Max?
Just a short introduction to economics:
If you cut government spending (funded by debt) you reduce growth as you are decreasing money supply.
And if you decrease government spending you can in turn reduce taxes and thereby decrease the dead weight loss and increase a sustainable non dept funded growth in the not too distant future.
You do not have to study economics to understand that.
At my university these connections are...
Just a short introduction to economics:
If you cut government spending (funded by debt) you reduce growth as you are decreasing money supply.
And if you decrease government spending you can in turn reduce taxes and thereby decrease the dead weight loss and increase a sustainable non dept funded growth in the not too distant future.
You do not have to study economics to understand that.
At my university these connections are taught in the first bachelor semesters.
And I teach them usually within the first weeks of people beginning their studies.
“If you cut government spending (funded by debt) you reduce growth as you are decreasing money supply.”
You literally just said “I don’t understand economics.”
Well if that growth is artificially created by government debt and you are decreasing your spending by returning to a balanced budget you are in fact reducing short term growth for a specific period.
I agree with you @Ben, of course it's [insert what you think is causing this]'s fault.
Business travel has never recovered. Delta's planes are full because they're flying fewer flights. Sales, business development and meetings/events workers aren't traveling like they did in 2018 and 2019. Just look at Hyatt. Hyatt is all-in on resorts and all-inclusives because the big, downtown city center hotels are dead and never coming back.
Vasu? Is that you? :)