A Delta Airlines and American Airlines plane are seen at Ronald Reagan Washington National Airport in Arlington, Virginia, on July 1, 2023.
Stefani Reynolds | AFP | Getty Images
Airlines are cutting their first-quarter profit and sales estimates, warning that a weaker economic backdrop is weighing on travel demand.
Ahead of a JPMorgan industry conference, American Airlines on Tuesday said it expects to lose between 60 cents a share and 80 cents a share in the primary three months of the 12 months, a wider loss than the 20 cents to 40 cents a share it previously forecast. It said revenue would likely be flat on the 12 months compared with a January estimate of an increase of as much as 5%.
American said in a securities filing that “the revenue environment has been weaker than initially expected attributable to the impact of Flight 5342 and softness within the domestic leisure segment, primarily in March,” referring to the deadly collision of one among its regional jets and an Army helicopter in Washington, D.C., in January.
The forecast followed Delta Air Lines slashing its first-quarter estimates after the market closed Monday. Delta said its outlook was “impacted by the recent reduction in consumer and company confidence brought on by increased macro uncertainty, driving softness in Domestic demand.”
Along with leisure travel, carriers have said also noted a pointy decline in government travel because the start of the newest Trump administration and its policies like tariffs, government layoffs and other cost cuts.
“I feel persons are cautious and so they’re pulling back somewhat bit on travel, not in an organized manner but just sort of waiting to see what is going on to transpire, whether it’s trade and tariff challenges or macroeconomic policy changes or simply somewhat little bit of the unsettledness of the market that all of us see,” CEO Ed Bastian said on the JPMorgan conference.
United Airlines CEO Scott Kirby echoed that sentiment at the identical conference.
“We have now also seen weakness within the demand market,” Kirby said. Government travel is about 2% of United’s business, but other staff’ travel can be affected, like consultants and contractors, which account for an additional 2% to three%.
“We have seen some bleed over to that into the domestic leisure market,” Kirby said.
One cost-saving measure: Kirby said United is retiring 21 aircraft early, airplanes that it might otherwise must spend $100 million on to overhaul engines this 12 months.
Each executives were more upbeat on longer-term trends and shiny spots like long-haul international and premium travel demand.
Delta shares ended the day greater than 7% lower. United shed 2% and American shares fell greater than 8%.
Southwest Airlines also cut its unit revenue guidance, to up not more than 4%, down from a forecast of as much as 7% for the primary quarter over last 12 months. The carrier also announced on Tuesday an end to its “two bags fly free” policy to charge customers for checked luggage for the primary time, starting in May. Its shares rose greater than 8%.
JetBlue Airways shares ended 4% higher.
