Delta warns of weaker pricing power as US shutdown dents sales

Delta said its ability to raise ticket prices is weakening and warned that the US government shutdown is eroding sales. Less travel by federal employees and contractors is costing Delta about $25m a month even as corporate and leisure travel remain strong, CEO Ed Bastian said Tuesday. Revenue from each seat flown a mile, a gauge of pricing power, will rise no more than 2% this quarter, Delta said. That’s down from 3.2% in the previous three-month period. The cautious forecast underscored investor skittishness after Delta sparked a rout earlier this month by warning that its grip on fares was weakening. The airline is predicting a 4% Q1 increase in its seat supply, stoking concerns that earnings will suffer at US carriers as rising capacity crimps their ability to jack up ticket prices. That would be a boon for travelers -- but a drag on airline profits. “Corporate travel will be affected by the shutdown, and will be replaced with lower yielding leisure travel," Helane Becker, an analyst at Cowen & Co., said in a note to clients. “Delta needs to see further revenue improvement to impress a skeptical investment community." Q1 adjusted earnings will be 70 c to 90 c a share, Delta said in a statement as it reported earnings. That trailed the 93-cent average of analyst estimates compiled by Bloomberg. Delta also cited “currency headwinds” as likely to affect its performance in the first three months of the year, as well as the timing of Easter, which falls later in Q2 than last year. For 2019 as a whole, the airline reaffirmed its 2019 profit forecast of $6 to $7 a share.<br/>