Delta, other airlines cut growth forecasts amid fears of economic uncertainty

Delta CEO Ed Bastian said on CNBC Monday evening — and during an investor presentation Tuesday morning — that the Atlanta-based airline has seen companies “start to pull back in terms of corporate spending” in the early part of this year, citing recent shrinking gross domestic product growth.

Airlines like Delta are barometers of the broader economy and their forecasts reveal business and consumer spending trends.

Bastian said Tuesday that corporate customers are “waiting to see what’s going to transpire, whether it’s trade and tariff challenges or macro economic policy changes.”

But he also tried to dispel any fears of an impending recession, characterizing it as a short-term situation that will bottom out in March.

Delta has also seen consumer spending drop in the wake of recent plane incidents, including a fatal collision involving an American jet in Washington, D.C., and a Delta crash landing in Toronto, which have spiked fears about the safety of flying.

“It was also a question about safety in our industry,” Bastian told CNBC. “And we do know it’s safe to fly. And we do see that starting to dissipate.”

The company expects to see about $500 million less revenue thanks to these problems, Bastian told investors Tuesday morning, which breaks down to 3%-4% quarterly revenue growth instead of 7%-9%.

Southwest on Tuesday predicted 2%-3% quarterly revenue growth instead of 5%-7% because of “less government travel” and impact from the California wildfires. American said it now expects flat Q1 revenue due to fallout from its fatal January crash, and less domestic leisure revenue.

Southwest also made waves Tuesday morning by announcing it would end its storied, blanket two free checked bags policy this summer in an effort to pull in more revenue.

United Airlines, meanwhile, did not change its revenue guidance, though it has taken a 50% hit in government-related business and seen a “big drop” in Canadian traffic into the U.S.

But United CEO Scott Kirby told investors Tuesday despite that, they can still stay within their current revenue forecast.

Bastian said Monday that Delta has seen a pullback in particular from aerospace and defense companies that are unsure about the fate of their government contracts in the new administration.

Car companies and firms in media, entertainment and tech, he said, have also shown hesitancy: “places where people just aren’t quite sure what’s going to happen.”

Plus, government employees and contractors fearing for the future of their jobs “are not out there spending money traveling,” Bastian said. He said they have adjusted their ticket prices down to match the market.

Less than 1% of the company’s revenue comes from direct government spending and 4% of its revenue comes from the Washington, D.C. area, Delta President Glen Hauenstein told investors Tuesday morning.

“It’s the one area of the country where we’re the least exposed. So I guess that’s a benefit at this point in time.”

Bastian said he thinks the quarter’s struggles will pass. The company has not changed its annual forecast for its most profitable year ever.

Its premium revenue, international travel and American Express partnership remain solid. “There’s nothing that we’ve been through these last couple months to indicate there’s any cracks in any of this.”

He also said he does not believe a recession is imminent. “We’re growing 4%, not 8%. If it was a recession, we’d be down 10%.”

There is “a lot of uncertainty” out there right now, but Bastian said there is some “cautious optimism that as the uncertainty starts to clear, then businesses are going to be ready and poised to start to grow.”