Delta Air Lines on Wednesday became one of the largest US American companies warning President Trump's escalating trade war is focused on its business and the global economy.
Delta CEO Ed Bastian said a recession is possible as businesses regain spending. “Everyone is prepared for uncertainty,” he told CNBC.
Airlines are extremely sensitive to economic changes as air travel is one of the first things individuals and businesses can cut when they are worried about their pay and profits.
In an investor call Wednesday, Delta executives said demand for main cabin tickets for domestic flights has recently declined. However, they added that demand from frequent flyers, premium cabin passengers and international travelers is being maintained. One executive said there was no significant increase in passengers cancelling flights.
Bastian expressed shock at the speed at which trade tensions have taken the wind from the economy.
“We don't have unprecedented uncertainty when we see what happened and the pivot very quickly about this self-harm,” he said.
Bastian's comments were in conflict with those of Treasury Secretary Scott Bescent, who said on Wednesday the chief executive told him the economy was solid.
In its first quarter revenue release, Delta said the lack of clarity about the economy prevented it from communicating this year's funds to investors.
Some customs data show a sharp decline in foreigners traveling to the US. According to data analytics and consulting firm Ah Datalytics, the number of foreigners entering the 42 major U.S. airports fell nearly 11% in March compared to the same period last year. The number of Americans entering the airport has increased by 5%.
Bastian told CNBC that around 80% of Delta's international reservations take place in the US. “U.S. consumers want to go somewhere, especially to get reprieve from all the madness we're experiencing,” he said.
Delta said it is not planning to increase capacity later this year, or the total number of seats available for flights. Wall Street analysts said such cost-cutting moves will help Delta shares rise around 6% on Wednesday morning. They've fallen 37% this year.
As a large importer of European manufacturer Airbus' planes, the theoretical Delta must pay the 20% tariff Trump has imposed on most imports from Europe this week. But Bastian said Delta would not pay the duties, suggesting that the airline would postpone the order while the duties were in place. “If you start putting 20% incremental costs on an aircraft, it's very difficult to get that mathematics to work,” he said.
