U.S. carriers fell the most in five weeks as Delta Air Lines cut its forecast for a key revenue gauge and President Donald Trump issued a revised order restricting entry by people from six predominantly Muslim countries.
Passenger revenue for each seat flown a mile (PRASM) — a closely watched measure of pricing power — will be flat this quarter, Atlanta-based Delta said Monday. The carrier said in January that the benchmark gauge, known as unit revenue, could rise as much as 2 percent after two years of declines.
U.S. airlines have been slowing growth of flights and seats to gain more pricing power over fares. Delta on Monday also lowered its outlook for first-quarter operating profit margin to 10 percent to 11 percent from an initial forecast of 11 percent to 13 percent.
"The good news is we do expect this to be the trough for the full year in terms of year-over-year margin performance," Chief Financial Officer Paul Jacobson said. "And while unit revenues are tracking on the low end of our original guide at flat vs. up 0 percent to 2 percent, we still believe that we're on that trajectory."
Fuel costs are up $20 a barrel over a year ago, adding to higher expenses from a new pilot contract, he said. Cowen & Co. analyst Helane Becker lowered her estimates for Delta's first-quarter and full-year earnings.
Delta fell 2.6 percent to $48.85 Monday. United Continental Holdings slid 3.2 percent, as did American Airlines Group.
"People have been waiting for positive PRASM for two years now, and we're still not there yet," Paul Lambert, an analyst at Tocqueville Asset Management, said of the industry's share decline.
Raymond James analyst Savanthi Syth attributed the industry's stock drop to "a combination of items, including the general market, Delta guide and perhaps travel ban noise adding to things."
Airlines have been grappling with Trump's January executive order barring entry by refugees and people from seven countries in the Middle East and North Africa.
The order was set aside following court challenges, and the administration issued a revised initiative Monday that exempted Iraq from the travel ban while amending the rules on refugees.
Total international travel to the U.S. fell 4 percent from 2016 in the nine days after Trump on Feb. 17 promised new travel restrictions, according to ForwardKeys, a Spanish travel analysis firm. Such bookings declined 6.5 percent after the initial ban, and then recovered 2.2 percent, ForwardKeys said in data released Sunday.
Bookings for international arrivals in the U.S. over the next three months are 0.4 percent behind a year earlier, the firm said, which forecasts travel based on analysis of 16 million daily bookings. Outbound travel from the U.S. for the same period was up 11 percent as of Feb. 28, but down from 20 percent growth before the initial ban, ForwardKeys said.