A rather interesting event recently took place in the stock market: major U.S. airlines experienced a significant drop in pre-market trading. It all started when Delta Air Lines and Southwest Airlines lowered their forecasts for the first quarter, sparking concerns about how the economic slowdown might affect demand for air travel.
Delta Air Lines, one of the largest airlines in the U.S., plummeted by as much as 11% in pre-market trading after cutting its first-quarter earnings forecast. Its industry peers, United Airlines and American Airlines, were also affected, losing 8% and 7%, respectively. This decline followed a broader market downturn on Monday, triggered by fears of a potential federal government shutdown and trade tensions that could lead to a U.S. recession.
Southwest Airlines, a budget carrier, also suffered losses, dropping 3% after revising its unit revenue growth expectations. The company now expects revenue per available seat mile (RASM) to grow between 2% and 4%, compared to its earlier forecast of a 5-7% increase. This revision was driven by weakening consumer activity, fueled by President Donald Trump’s tariffs, which have raised concerns about an economic slowdown and reduced spending on travel.
Just two months ago, major U.S. airlines were enjoying strong demand and high fares on their routes. However, they are now facing significant challenges. Analysts like Stephen Trent from Citi consider Delta’s forecast downgrade disappointing but not entirely unexpected. According to him, concerns about the strength of consumer demand in the U.S., the potential impact of cryptocurrencies on government-funded air travel, uncertainty around tariffs, and several high-profile aviation incidents in North America since late January have all contributed to this decision.
Against this backdrop, major U.S. airlines are preparing to speak at the J.P. Morgan Industrials Conference, where they are expected to provide more details on the evolving demand landscape and update their forecasts for the current quarter. This will be particularly interesting given that Delta now expects earnings of $0.30 to $0.50 per share, down from its previous forecast of $0.70 to $1.00 per share.
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