Airlines Cut Guidance as Consumer Weakness Hits Q1 Spending

The airline industry is facing increasing turbulence as major carriers have revised their Q1 guidance lower, citing a slowdown in consumer and corporate travel demand. As airlines prepare to present at the J.P. Morgan Industrials Conference, a key sell-side event taking place over the next two days, investors will be closely watching for further commentary on the state of travel demand and potential adjustments to full-year outlooks.

The most notable revision came from Delta Air Lines (DAL), which slashed its Q1 earnings and revenue guidance. CEO Ed Bastian acknowledged that consumer confidence is declining, leading to softer-than-expected domestic travel demand. However, he emphasized that the slowdown may be temporary, stating that international and premium segments remain resilient and that Q2 is expected to show improvement. Importantly, Bastian dismissed fears of an impending recession, asserting that Delta will still remain profitable in Q1, albeit at a lower level than initially forecasted.

Delta now sees Q1 EPS between $0.30 and $0.50, significantly below its previous estimate of $0.70 to $1.00 and well under consensus expectations of $0.82. Revenue growth has also been revised down from +7% to 9% YoY to a more modest +3% to 4% YoY, reflecting a $500 million revenue shortfall from initial projections. Bastian reiterated that the full-year outlook remains unchanged for now, with expectations that margins will expand as conditions stabilize in the second quarter.

Other Airlines Lower Expectations

While Delta was the most high-profile carrier to reduce guidance, it wasn’t alone. Several other airlines also adjusted their outlooks lower, reinforcing concerns that consumer spending on travel is slowing as economic uncertainty weighs on confidence.

American Airlines (AAL)

- Lowered Q1 EPS to ($0.80)-($0.60), significantly below prior guidance of ($0.40)-($0.20) and well under consensus of ($0.30).

- Revenue guidance was slashed to flat YoY ($12.57 billion), down from the previous +3% to 5% growth expectation.

- Available seat miles (ASMs) were reaffirmed at flat to -2% YoY, while cost pressures (CASM-ex) remain elevated.

JetBlue Airways (JBLU)

- Capacity expectations have been revised lower, with ASMs now expected to decline 5% to 4% YoY, compared to the prior range of 5% to 2%.

- Revenue per available seat mile (RASM) guidance remains unchanged at (-0.5%) to +3.5% YoY, suggesting no major revenue improvement despite capacity adjustments.

- Fuel costs are trending lower, now expected at $2.55 to $2.65 per gallon, down from $2.65 to $2.80.

- Capital expenditures have been revised down to $215 million from $270 million, indicating more conservative spending plans in response to demand uncertainty.

Southwest Airlines (LUV)

- Revenue per available seat mile (RASM) growth has been cut to +2% to 4% YoY, down from +5% to 7% YoY.

- ASMs are expected to decline 2% YoY, slightly better than the prior guidance range of -2% to -3%.

- Fuel cost estimates have been lowered to $2.35-$2.45 per gallon, from $2.50-$2.60.

- CASM-ex (cost per available seat mile excluding fuel) is now expected to rise 6% YoY, a slight improvement from prior estimates of 7% to 9% YoY.

- Southwest also announced plans to start charging more customers for checked bags starting in May 2025, signaling a potential push to offset revenue headwinds through ancillary fees.

Investor Takeaways: Near-Term Pressure, Long-Term Uncertainty

These guidance revisions have significant implications for the broader consumer spending picture as Q1 earnings season approaches. The airline sector is often seen as a leading indicator of discretionary spending trends, and the recent warnings suggest that consumers may be pulling back on travel expenditures more sharply than anticipated.

However, Delta’s commentary suggests the weakness may be short-lived rather than a sign of a deeper economic downturn. Bastian noted that corporate and consumer spending began stalling in February, but he expects a rebound in Q2, adding that Delta remains confident in its full-year guidance. Investors will be looking for confirmation of this outlook at the J.P. Morgan Industrials Conference, where more airlines are expected to update their forecasts.

For now, these warnings will likely rein in expectations for Q1 airline earnings and could lead to additional downside revisions from other carriers. With the Federal Reserve’s March policy meeting approaching, investors will also be watching whether travel softness impacts broader economic forecasts, particularly in regard to interest rate expectations.

As airlines face near-term demand headwinds, management commentary at the J.P. Morgan Industrials Conference will be crucial in determining whether this is a temporary soft patch or a more concerning shift in consumer behavior heading into the summer travel season.