Airlines Cut Q1 Forecasts Amid Weak Domestic Demand
Major U.S. airlines have revised their first-quarter profit and revenue forecasts downward amid signs of a weakening economic backdrop, with domestic travel demand showing significant softness. Delta Air Lines, American Airlines, and Southwest Airlines have all slashed their estimates, reflecting growing concerns over both economic uncertainty and a decline in government travel.
American Airlines announced on Tuesday that it now expects to lose between 60 cents and 80 cents per share in the first quarter—a much wider loss than its earlier forecast of 20 to 40 cents per share. The carrier also revised its revenue outlook from an anticipated growth of as much as 5% to a flat year-over-year performance. According to a recent securities filing, American cited the impact of the Flight 5342 incident—the deadly collision between one of its regional jets and an Army helicopter in Washington, D.C., in January—as a key factor. The airline noted that the fallout from the incident, coupled with softness in the domestic leisure segment, especially in March, has significantly dampened its revenue expectations.
Delta Air Lines also trimmed its first-quarter forecasts, stating that its outlook had been negatively impacted by reduced consumer and corporate confidence. Delta’s revised estimates were driven by increased macroeconomic uncertainty, which has led to a notable decline in domestic travel demand. The company explained that the softer environment has resulted in a slower pace of bookings and a more cautious approach among both leisure and business travelers. This sentiment was evident in the after-hours trading, as Delta’s shares fell more than 8% following its announcement.
Southwest Airlines joined its peers in cutting its revenue guidance for the quarter, lowering its forecast to a maximum of 4% growth compared to the previous prediction of up to 7%. Southwest has long relied on robust domestic demand, bolstered by its hallmark policy of free checked bags and flexible ticketing options. However, the recent cut in revenue forecasts indicates that even this low-cost leader is feeling the pinch of broader market headwinds. Along with weaker leisure travel, the airline reported a significant decline in government travel, a trend that has become more pronounced since the beginning of the latest Trump administration.
The slowdown in government travel is a concern across the industry. Carriers have reported that reduced travel by government officials, along with lower corporate travel budgets, is contributing to the overall weakness in domestic travel demand. With many companies and agencies cutting back on travel due to economic uncertainty, airlines are now facing lower booking levels across multiple segments.
Investors have responded to these downward revisions with sharp declines in airline share prices. In premarket trading on Tuesday morning, Delta’s shares dropped more than 8% while American Airlines fell nearly 4%. These market reactions reflect growing apprehension about the near-term prospects for the travel industry, which had shown resilience following the Covid-19 pandemic but now faces new challenges from economic and geopolitical uncertainties.
Despite these adjustments to their short-term outlooks, all three carriers maintained a cautiously optimistic view for their long-term performance. They pointed to ongoing efforts to stimulate demand in premium, international, and loyalty segments as areas that remain in line with previous expectations. As the industry prepares for further discussions at upcoming conferences, airline executives continue to monitor evolving trends and adapt their strategies to navigate the uncertain economic landscape.
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Sources: AirGuide Business airguide.info, bing.com, cnbc.com