Delta growth to slow further in first quarter as shutdown weighs

INTERNATIONAL – Delta Air Lines on Tuesday forecast a further decline in revenue growth per mile flown in the first quarter, hit by a partial government shutdown and worries about whether airlines can raise fares in an uncertain global economy.

Shares fell 2 percent to $46.80 before the bell.

Delta, the second largest US airline, reported quarterly revenue in line with analysts’ estimates and profit that topped he Wall Street consensus by 3 cents per share.

But Delta forecast that year-on-year growth in unit revenue, which compares sales to flight capacity, would be hurt in the current quarter by the timing of Easter, increasing foreign exchange headwinds, and the ongoing US government shutdown, which entered its 25th day on Tuesday.

Speaking on CNBC, Delta Chief Executive Officer Ed Bastian said the partial shutdown will cost the airline $25 million in lost revenue in January because fewer government contractors are traveling.

And with some 800,000 government employees furloughed or working without pay, US airlines are not able to launch new routes or place newly delivered airplanes into service because they need certification from federal officials.

In a note to investors, Cowen and Co analyst Helane Becker said corporate travel will also be affected by the shutdown and replaced with lower-yielding leisure travel.

Delta also forecast first-quarter earnings between 70 cents and 90 cents per share, below analysts’ estimate of 94 cents, according to IBES data from Refinitiv.

Both Delta and larger rival American Airlines Inc lowered estimates earlier this month for fourth-quarter revenue per available seat, raising concerns that an economic deceleration was hurting business travel. The forecasts sent their shares sharply lower.

Delta said on Tuesday that unit revenue will be in a range between flat to up 2 percent in the first quarter, compared with 3.2 percent growth in the fourth quarter ended Dec. 31.

On an adjusted basis, the airline earned $1.30 per share for the fourth quarter, above the $1.27 per share expected by analysts.

Total operating revenue rose 5 percent to $10.74 billion, in line with the Wall Street estimate.

Reuters