For Delta, It's All Relative

There's definitely a slowdown in demand, executives said. But Delta is betting its brand is so strong compared to other airlines that it can weather whatever happens.

Dear readers,

As I was conducting my anonymous interviews last week with industry insiders to capture the state of airline demand,¹ a couple of senior executives told me we’d start getting clarity once earnings began and airlines issued new guidance. But Delta, the first U.S. airline to report first quarter results, said the situation is so messy that it’s not even worth trying to project beyond the second quarter.

“Given current uncertainty, Delta is not reaffirming full year 2025 financial guidance and will provide an update later in the year as visibility improves,” it said in its earnings release.² This includes guidance for free cash flow and earnings per share that it announced in January.

The weird thing is, despite all the talk that a recession is coming and that demand has slowed, neither the first quarter nor the second looks that bad for Delta. Despite misjudging demand (Delta held too many seats for business travelers who did not show up), the airline eked out $320 million in pre-tax profit on total revenues of $14 billion. The second quarter estimates don’t look that bad either: Delta predicts an operating margin of 11-14 percent.

But we know that’s not the full story. The margins should be better, considering fuel prices have fallen (they were off 11 percent year-over-year for the first quarter), and the second quarter increasingly is Delta’s strongest as school summer vacation periods have changed.

Plus, an airline as adeptly run as Delta should be able to predict, with reasonable certainty, what will happen for the rest of the year. But you all probably know why it can’t. That became obvious about three hours after Delta executives ended their earnings call³ when the president took to social media to announce a 90-day pause on most tariffs. Delta’s stock rose 23.38 percent for the day.

I think it’s too early for Delta (or any airline, really) to celebrate. First, the massive and widespread proposed tariffs could return. But even if they don’t, we’ve now seen how manic indecisiveness from the president affects the airline business. No one knows what to expect from this administration on the economy (or on anything else, really) and that makes it tough to plan for.

By my count, the word "uncertainty" came up at least 10 times on Delta's call. When people and businesses do not know what will come next, they naturally hold off on big purchases, as Delta executives suggested more than once on the call. In an instance, and on a whim, the president can move markets and change policies. In that kind of an environment, how are people and businesses supposed to plan ahead?

Remember that it was uncertainty — and not tariffs — that started this mess for airlines. This period of demand weakness started in early February, before the average American or U.S. company was taking seriously the threat of tariffs and during a period when markets were holding up fine. Back then, consumers and businesses pulled back not because of any concrete or immediate fear, but because they weren’t sure what would come next. That fear didn’t dissipate on Wednesday. If anything, it got worse.

So no matter what happens with tariffs, this soft demand could persist unless the government can accurately telegraph stability. It’s frustrating, for sure.

We all know that Delta executives are confident in their own abilities, but even they seemed to suggest that they know this is out of their hands. The airline on Wednesday told investors it plans to react by pulling levers always available to an airline in a downturn — cut capacity, slash costs, and try to win customers at the expense of weaker competitors. In this world in which consumers "remain cautious" and "corporate travel trends are choppy," as Delta president Glen Hauenstein told analysts, the carrier probably has no choice.

Here are some highlights from Delta's call.