Delta Air Lines made a significant move on Monday, revising its first-quarter profit forecast down by 50%, leading to a 14% drop in its stock during after-hours trading. The airline attributed the revision to a deteriorating economic environment, marked by growing uncertainty in the U.S. economy.

As the first major U.S. airline to face such challenges, Delta pointed to the impact of rising economic concerns on both consumer and business travel. With consumer and business confidence on the decline, largely due to tariffs and the potential for further trade barriers, there is growing fear of rising costs. Additionally, the Atlanta Federal Reserve’s GDPNow tracker has suggested a possible contraction in the U.S. economy for the first quarter of 2025.

Given the airline industry’s close ties to consumer spending, this news has raised alarms about declining travel demand. Revenue from government-related travel has already been impacted by increased scrutiny on federal spending.

Delta now expects its first-quarter profit to fall between 30 and 50 cents per share, down from the initial projection of 70 cents to $1 per share. This adjustment has had a knock-on effect on the airline sector, with shares of Delta falling by 14%, while United Airlines dropped 11%, and American Airlines saw an 8% dip.

The S&P 500 passenger airlines index has taken a hit, dropping 22% in the past month, far outpacing the 7.5% decrease in the broader S&P 500 index. Delta’s stock alone has dropped 24% in the same period.

While Delta’s customer base is considered affluent and diverse, which analysts had hoped would shield it from weaker demand, the airline reported declines in bookings from industries such as aerospace, defense, automotive, media, entertainment, and technology. This has raised expectations that other airlines may soon revise their forecasts as well.

In addition, Delta has reduced its revenue growth forecast for the first quarter, now expecting an increase of only 3% to 4%, down from the previous projection of 7% to 9%. Despite attempts to downplay recession concerns, a recent report from the Federal Reserve Bank of New York revealed that American households are increasingly pessimistic about their financial outlook, adding further uncertainty to the airline industry.

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