Why Delta, United, American, and Southwest Airlines are Cutting Forecasts as US Economic Uncertainty Causes the Travel Sector to Plummet: New Report

Wednesday, March 12, 2025

Delta, United, American, and Southwest Airlines have slashed their profit forecasts as economic uncertainty in the U.S. dampens travel demand. Delta, the first major carrier to report weakened bookings, cut its first-quarter profit estimate by half, citing reduced corporate and consumer spending. The announcement sent airline stocks tumbling, with Delta dropping 14%, United 11%, and American nearly 9%. Analysts warn that mounting concerns over tariffs, inflation, and potential economic slowdown are affecting travel decisions, putting further pressure on the airline industry.

Economic Concerns Impacting Travel

Delta is the first major U.S. airline to report that economic worries are negatively affecting domestic travel. Bastian noted that companies have started reducing expenditures, with corporate travel spending slowing down. Discretionary consumer spending has also been impacted, as travelers are more hesitant in uncertain economic conditions.

Rising concerns about tariffs imposed by President Donald Trump, potential additional levies, and inflationary pressures have dampened consumer and business confidence. The Atlanta Federal Reserve’s GDPNow tracker suggests that the U.S. economy might shrink in the first quarter of the year. Since travel demand closely follows broader economic trends, analysts warn that a downturn could present serious challenges for the airline industry.

Profit and Revenue Forecast Slashed

Delta now expects first-quarter earnings per share to fall between 30 cents and 50 cents, a sharp drop from its earlier estimate of 70 cents to $1. Analysts at Jefferies had anticipated a downward revision, but the extent of the cut was more severe than expected.

The airline also adjusted its revenue growth expectations, now predicting a 3% to 4% increase year-over-year, compared to the 7% to 9% growth previously forecasted. The weaker outlook has fueled investor concerns about the airline sector as a whole.

Airline Stocks Decline

Delta’s earnings cut triggered a broader selloff in airline stocks during after-hours trading. Shares of United Airlines (UAL.O) dropped 11%, while American Airlines (AAL.O) fell nearly 9%. The S&P 500 passenger airlines index (.SPLRCALI) has declined 22% over the past month, a much steeper drop compared to the 7.5% decline in the overall S&P 500 index (.SPX). Delta’s stock alone has fallen 24% in the past month.

Challenges Across the Industry

Delta had previously been considered better positioned to weather economic uncertainty due to its affluent and diversified customer base. However, the company is now seeing weaker bookings from key industries, including aerospace and defense, automobiles, media, entertainment, and technology.

Other airlines may soon follow Delta in revising their forecasts. Analysts at Deutsche Bank recently cautioned that a softening economy casts doubt on the airline industry’s revenue outlook. Last week, Seaport Research Partners also slashed its 2025 pre-tax profit estimates for major U.S. airlines, including Delta, United, American, and Southwest (LUV.N). These projections had not fully accounted for potential economic headwinds, such as a prolonged trade war or deep government spending cuts.

Several airline executives are set to provide further updates at a JPMorgan industry conference on Tuesday.

Delta, United, American, and Southwest Airlines have cut their profit forecasts as U.S. economic uncertainty weakens travel demand. Rising inflation, tariffs, and reduced corporate spending have led to lower bookings, causing airline stocks to plunge.

Economic Outlook

Despite growing concerns, a key economic adviser to President Trump pushed back against recession fears, stating there are still strong indicators supporting the U.S. economy. However, a report from the Federal Reserve Bank of New York showed that American households are becoming increasingly pessimistic about their financial future.

With economic pressures mounting and travel demand slowing, the airline industry faces an uncertain path ahead. Delta’s earnings revision is a clear signal that carriers may need to brace for further turbulence in the coming months.

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