Delta Air Lines slashes guidance on weak domestic travel demand

Delta Air Lines Inc (NYSE:DAL) has significantly reduced its profit and revenue forecast for the first quarter due to weakening travel demand, sending its shares more than 7% lower on Tuesday.

The airline now expects earnings per share in the range of $0.30 to $0.50, down from its earlier forecast of $0.70 to $1.

It also downwardly revised its revenue growth expectations for the quarter, now expecting growth between 3% and 4%, down from its earlier guidance of 7% to 9%.

Delta cited increased macroeconomic volatility and concerns about flight safety following several recent incidents in North America as the reasons for tempering domestic travel demand.

Macroeconomic uncertainty

Analysts at Bank of America believe airline industry demand will likely bounce along the trough until macroeconomic stability is reached.

“The macroeconomic uncertainty is unfolding in real time as Delta is the first airline to cut its 1Q 2025 revenue growth outlook by 400 to 500 basis points,” they wrote in a note to clients

“We knew February was soft following our American Airlines headquarters visit in late February, but this cut was deeper than expected.”  

A key question is whether the demand weakness is transitory, analysts wrote.

“Delta mentioned that the revenue miss was driven solely by domestic demand as ‘premium, international and loyalty revenue growth trends are consistent with expectations,’” they wrote.

“While this is encouraging, investors will worry about this spreading to other geographies and demand cohorts, particularly as premium revenue growth has yet to be tested since its surge post-pandemic.”

Are other airline stocks at risk?

The bank’s analysts see Underperform-rated Southwest and JetBlue as the most at risk due to weakness in the domestic market.

Neutral-rated American Airlines has both the macroeconomic impact and likely demand weakness following the fatal accident at Washington Reagan airport in January which hurt the airline’s outlook.

However, they see Buy-rated United Airlines as less affected given its international and premium revenues.

Analysts repeated their Buy rating for Delta but lowered their price target to $65 from $78.  

Shares of Delta fell 7% to about $47 late morning on Tuesday. The news also dragged on the airline’s peers with American Airlines down 4.8% and United Airlines down 1.9%.