TLDR:
- Delta beat Q1 earnings expectations but withdrew full-year guidance due to economic uncertainty
- CEO Ed Bastian cited “stalled” growth related to global trade tensions and Trump tariffs
- Stock rose 3% in premarket trading despite being down over 40% year-to-date
- Delta plans to reduce capacity growth by 3-4% in second half of 2025
- Premium travel demand remains resilient despite broader economic concerns
Delta Air Lines reported better-than-expected earnings for the first quarter of 2025, posting earnings per share of $0.46 compared to analyst expectations of $0.39. Revenue came in at $12.98 billion, just missing forecasts of $12.99 billion.
Despite the earnings beat, Delta made the surprising decision to withdraw its full-year guidance, which had previously targeted profits of greater than $7.35 per share.
“Given the lack of economic clarity, it is premature at this time to provide an updated full-year outlook,” the company stated in its earnings release.
CEO Ed Bastian pointed to “broad economic uncertainty around global trade” as the primary reason for growth stalling. The announcement came just hours after President Donald Trump’s sweeping global tariffs took effect.
“The level of uncertainty that we’re facing coming out of the global trade discussions and skirmishes is a bit unprecedented,” Bastian told Yahoo Finance.
Delta shares rose more than 3% in premarket trading following the announcement. This positive reaction came despite the stock having fallen approximately 40% this year as travel stocks have been hammered by recession fears and tariff uncertainty.
Operational Adjustments
In response to the uncertain economic environment, Delta outlined three key operational adjustments to ensure financial sustainability.
First, the airline plans to reduce its capacity growth by 3-4% in the second half of 2025 compared to earlier projections. This adjustment aims to align capacity more closely with levels seen in previous years.
Second, Delta will maintain its current headcount while accounting for natural attrition. This approach allows the company to manage personnel costs without resorting to layoffs.
Third, the carrier intends to reduce capital expenditures to lower its “cost of flying.” These expenditures typically include investments in new aircraft, terminal upgrades, and technology systems.
“We’re going to have to go a bit into defensive mode and at least take out any of the cost of growth in our business to the best we can,” Bastian explained.
Premium Travel Resilience
Despite the broader economic concerns, Delta reported continued strength in its premium offerings. This segment has been a key driver of airline profitability since the pandemic.
“We know we’re not immune… whether it’s the wealth effect or other things that could cause some question in that space, and we’re prepared to take action,” Bastian said. He added that Delta’s premium offerings “all are showing great resilience” and continue to grow on a quarter-over-quarter basis.
This resilience in premium travel is particularly notable given the uncertainty surrounding how this segment would perform in a recession scenario.
J.P. Morgan analyst Jamie Baker had previously highlighted this as a major unknown, stating, “One of the biggest uncertainties for us is at what level of stock market pain does the premium passenger begin to crack.”
According to data from Moody’s Analytics, households earning $250,000 or more annually account for 50% of consumer spending, representing the core demographic for Delta’s premium services.
For the second quarter, Delta expects earnings between $1.70 and $2.30 per share, compared to analysts’ estimates of $2.21. The airline anticipates flat year-over-year revenue growth at the midpoint of its guidance as it navigates what Bastian described as a “slower-growth environment.”
“I would say that at the present time, it’s shaping up to be a ‘strong’, not a ‘great’ season,” Bastian said. “‘Great’ would be the plan that we have, which is 7% growth for the year… I think the way that best describes our revenue at the present time across the board is ‘stalled.'”
Delta’s earnings report was closely watched as an early indicator of how President Trump’s trade policies and market volatility are affecting consumer and corporate confidence.
The airline had previously signaled economic concerns in March when it cut its first-quarter guidance, warning that revenue would be $500 million less than previously expected. At that time, Bastian attributed about half of that reduction to transitory factors such as bad weather and industry-related incidents, with the remainder primarily related to reduced travel spending by companies and consumers.
Wall Street’s expectations for Delta’s 2025 earnings had already fallen dramatically in recent days, dropping to $5.88 from $7.14 at the end of March, according to FactSet data.
Despite the current challenges, some analysts remain optimistic about Delta’s prospects. Raymond James analyst Savanthi Syth maintained a Strong Buy rating on the stock last week, citing its “attractive valuation” and margin advantage over competitors. Her target price of $62 implies 60% upside from Tuesday’s closing price.
Looking ahead, Delta’s approach to navigating the current economic uncertainty could set the tone for the broader airline industry. United Airlines, American Airlines, and Southwest are all scheduled to report earnings in the coming weeks.
“I think we’re going to hear the word uncertainty a lot,” Allspring Global Investments senior portfolio manager Bryant VanCronkhite told Yahoo Finance regarding the upcoming earnings season.
The Trump administration’s tariff policies have increased concerns about a potential U.S. recession, with JPMorgan recently raising its recession risk forecast to 60% from 40%.
Delta indicated it remains in communication with the administration regarding the impact of trade policies on its business.
“Our team is in constant communication with the administration at all levels, and we certainly let them know how our business is doing,” Bastian said.
The next major industry gathering will be the 2025 Paris Air Show in two months, though Bastian suggested that major international discussions and deals might be deferred until there’s greater clarity on trade issues.
