- Delta Air Lines and American Airlines are among those cutting growth forecasts, citing economic uncertainty. Southwest and JetBlue joined them in adjusting targets.
- Southwest also said it would drop its free checked bag policy after 54 years, sending its share price higher on the news.
- Shares in other travel-related companies fell Tuesday after guidance from airlines.
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Some of America’s largest airlines cut growth expectations on Tuesday, March 11, due to economic uncertainty. Meanwhile, another ended a longstanding policy, which was a favorite with customers.
Delta Air Lines and American Airlines are among those pulling back on forecasts as talks of a recession heat up.
Why airlines think they’ll make less than expected
American Airlines initially expected growth of roughly 3%-5% for the first quarter of 2025. The company now expects first-quarter revenue to be flat or down compared to a year ago.
“The revenue environment has been weaker than initially expected due to the impact of Flight 5342 and softness in the domestic leisure segment, primarily in March,” the company said in a filing with the Securities and Exchange Commission Tuesday.
Sixty-seven people died after an Army-operated Black Hawk helicopter collided with American Airlines Flight 5342 in January. The crash happened as the plane was trying to land at Ronald Reagan Washington National Airport in Arlington, Virginia.
Then, in February, a Delta flight flipped over while landing in Toronto, injuring 21 passengers. Delta Air Lines CEO Ed Bastian told CNBC both events hurt business.
“These events somewhat exacerbated the impact on us,” Bastian said. “So it’s not just corporate and consumer. It was also a question about safety in our industry.”
Delta is still expecting growth, but much smaller than initial forecasts. In January, it projected 7%-9% revenue growth but cut that forecast to 3%-4% on Monday, March 10.
“The first quarter is always the seasonally most difficult quarter of the year for our industry, and historically somewhat tough to project,” Bastian said Monday. “You couple that with the fact that we entered the quarter with high growth expectations. We finished the year strong. We were up in the fourth quarter [by a] meaningful amount; we anticipated an 8% growth rate. In terms of top line, we’re going to come in at a 4% growth rate, so it has not gone backward, but it’s not growing as fast as we were anticipating.”
Consumer confidence fell in February
Delta specifically cited the “recent reduction in consumer and corporate confidence” in an SEC filing announcing the revision.
The Conference Board’s Consumer Confidence survey took its biggest monthly dive since August 2021 in February.
“Average 12-month inflation expectations surged from 5.2% to 6% in February,” Conference Board Senior Economist for Global Indicators Stephanie Guichard wrote in the report. “This increase likely reflected a mix of factors, including sticky inflation but also the recent jump in prices of key household staples like eggs and the expected impact of tariffs.”
“There was a sharp increase in the mentions of trade and tariffs, back to a level unseen since 2019,” Guichard added. “Most notably, comments on the current Administration and its policies dominated the responses.”
JetBlue and Southwest also followed the trend of downward revisions Tuesday morning.
Southwest shocks with no more free bags
Southwest announced it would end its free baggage policy after 54 years. Starting May 28, only Southwest’s Rapid Rewards A-List Preferred members and those who book business select seats will get two free checked bags. Regular A-List members and Southwest credit card holders will get one checked bag.
While social media reaction to the policy change has been less than favorable, it’s going over well with investors. The company said the move will help Southwest return to the level of profitability shareholders expect. Southwest ended the trading day Tuesday up more than 8%.
Meanwhile, Delta and American’s stock tumbled Tuesday. The downward adjustments by airlines are also taking a toll on the travel industry. Shares of Disney, Airbnb and Marriott all lost between 4-5% Tuesday.
