Delta revised its profit outlook on Monday, citing “a recent reduction in consumer and corporate confidence caused by increased macro uncertainty.” During the first quarter, the Atlanta-based airline now expects operating margins between 4% and 5%, down from the initial guidance of 6% to 8%.
CEO Ed Bastian provided some color on the reduced guidance during a Tuesday J.P. Morgan investors conference. He noted a “series of factors” during the first quarter, including the midair collision involving American flight 5342 and a Black Hawk helicopter.
Bastian called the January accident “ a causal fact in terms of the trend line that we’re looking at.”
Politics Played a Role
During the conference, he said consumer confidence began to “wane” following the collision.
“ We saw a pretty immediate stall in both corporate travel and bookings,” Bastian added. “Not that they stopped, but the growth rates that we had stalled considerably.
“And consumer confidence, certainly in air travel, started to wane a little bit as questions of safety came and unfortunately, as we all know, some aspects of the crash were politicized, which did not help matters in terms of restoring confidence in consumers’ minds.”
Then, on Feb. 17, a CRJ-900 operated by Delta subsidiary Endeavor Air crashed in Toronto. All 80 on board the aircraft survived.
Following that accident, Delta corrected the record over speculation that the pilots were underqualified.
Bastian stated that the accident “ fed into another round of delay.” But economic uncertainty was also playing a part.
Despite pullbacks in government spending, less than 1% of Delta’s revenue comes directly from government, and 4% comes directly from the Washington area.
“ It’s the one area of the country that we’re the least exposed,” airline President Glen Hauenstein added. “So, I guess that’s a benefit at this point in time.”
