ZACKSยท2025-04-30 15:50Core Viewpoint - The current economic uncertainties, particularly due to tariffs, are negatively impacting domestic air travel demand for major U.S. airlines, including Delta Air Lines (DAL) and United Airlines (UAL), leading to a reassessment of their investment potential. Group 1: Delta Air Lines (DAL) - DAL is facing a slowdown in domestic air travel demand, prompting the withdrawal of its full-year 2025 outlook and a reduction in planned capacity growth from 3-4% to flat in the second half of 2025 [4][5] - Despite challenges, DAL benefits from declining oil prices, which have led to a 7% year-over-year decrease in fuel expenses in Q1 2025, positively impacting its bottom line [6] - DAL resumed quarterly dividends in 2023 and increased its payout by 50% in June 2024, reflecting confidence in cash flow and appealing to income-seeking investors [7] - The airline's liquidity is strong, ending Q1 2025 with $3.7 billion in cash against $2.9 billion in debt, indicating sufficient cash to meet obligations [8] Group 2: United Airlines (UAL) - UAL is also experiencing a slowdown in domestic travel but has seen strong international revenues, with Atlantic and Pacific unit revenues increasing by 4.7% and 8.5% year-over-year, respectively [9] - UAL has provided earnings per share guidance for 2025 under two scenarios: $11.50 to $13.50 in a stable market and $7 to $9 in a recessionary environment [10][11] - To address weak demand, UAL plans to reduce scheduled domestic capacity by 4 points starting in Q3 2025, while facing high labor costs and fleet delivery delays due to issues with Boeing's 737 MAX [12][13] - UAL announced a $1.5 billion share buyback plan in October 2024, marking its first buyback since the pandemic, and has repurchased $451 million in shares through April 2025 [14] Group 3: Comparative Analysis - The Zacks Consensus Estimate indicates a 0.6% decrease in DAL's 2025 sales, while UAL is expected to see a 2.9% increase in the same period [15][16] - Both airlines have seen their EPS estimates trending downward over the past 30 days, with DAL's 2025 EPS expected to drop by 12.7% and UAL's by 3.6% [15][16] - Year-to-date, DAL and UAL stocks have declined significantly, with DAL down 30.5% and UAL down 29% [18] - DAL is trading at a forward sales multiple of 0.44, while UAL is at 0.37, both below their industry's average, indicating attractive valuations [21] Group 4: Conclusion - The uncertain market environment is adversely affecting both DAL and UAL, but DAL's dividend payments and stronger liquidity position make it a more favorable investment compared to UAL, which does not offer dividends and faces fleet-related concerns [24][25][26]