When British voters made an unexpected decision two years ago to leave the European Union, Delta Air Lines expected business travel to the U.K. to slide.
It hasn’t. And so far, fears of a trade war between the U.S. and China, the two largest economies on the planet, haven’t sapped corporate trips to the Asian country either. The sector’s continued strength despite shudders in financial markets helped the Atlanta-based company top Wall Street’s profit estimates for the three months through March and boosted confidence in revenue growth this quarter.
“We are apprehensive and monitoring very closely how business travel is going back and forth to China, but all we’ve seen is continued improvements and continued strength in that,” President Glen Hauenstein said on an earnings call with investors. “China, Japan, South Korea are all showing incredible strength.”
Revenue from flights in the company’s Pacific market climbed 1.7 percent to $578 million in the first quarter, Delta said, help push an 8 percent increase in total sales, which reached $9.76 billion. Profit of 74 cents a share, excluding some items, compared with the 73-cent average estimate from analysts surveyed by FactSet.
Delta climbed 2.7 percent to $52.87 in New York trading on Thursday, paring declines that have outpaced the broader S&P 500 so far this year.
Airlines are just one of the American industries concerned by the prospect of a trade war with China after President Trump imposed tariffs on some $50 billion of the country’s imports, then threatened duties on $100 billion more when Beijing retaliated.
Retailers, farmers and others have urged the administration to exercise caution, warning that such a conflict could erase any benefits from tax cuts Trump signed in December. The reduction of the top corporate rate to 21 percent from 35 percent prompted U.S. businesses to roll out plans in January and February for new capital investments, pay raises and bonuses while the stock market surged to record highs.
That changed with bellicose statements on trade from both Beijing and Washington, along with the departure of top economic adviser Gary Cohn, a former Goldman Sachs executive who had counseled Trump against imposing tariffs. The president’s early March decision to ignore that advice and set duties of 25 percent on steel imports and 10 percent on aluminum, citing national security concerns, was followed shortly by the Chinese levies.
The latter duties involve unfair trade practices, a different section of the law, but the White House has wide latitude under both. The president, who often bragged early in his tenure about the stock market’s performance, has brushed off concerns about its negative reaction to the tariffs.
“There is no playbook for what Trump is attempting,” said Chris Krueger, an analyst with Cowen Washington Research Group. “This is extremely improvisational and gut-level saber rattling. Perhaps it does all end with that pot of gold, but count us as skeptical.
