U.S. airlines have gone from optimistic to wary.
President Donald Trump’s tariff wars have shaken the U.S. economy, and another industry feeling the impact is aviation. Airline executives have reported weaker demand for domestic travel, with American Airlines, Southwest, United, and Delta all experiencing a slowdown in leisure bookings. As a result, their revenue projections for the quarter have shifted.
What’s Going On?
Airlines had expected to turn a profit this quarter, but market uncertainty and declining consumer confidence have forced them to adjust expectations. American Airlines’ revenue growth has stalled, while Delta now anticipates 4% less revenue than previously forecasted. United is also bracing for a challenging period ahead. These announcements have sent airline stocks tumbling.
Several factors are contributing to the slump in domestic flight bookings. Consumer confidence has been shaken by recent high-profile plane crashes, including the American Airlines collision with a helicopter that killed all on board and the Delta aircraft that flipped in Toronto. Delta CEO Ed Bastian acknowledged the public’s concerns, stating, “There’s a whole generation of consumers that didn’t realize these things can happen.”
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However, ongoing tariff tensions and market volatility are exacerbating the situation. After President Trump declined to rule out a potential recession, stock markets took a hit. Speaking at the J.P. Morgan conference, Bastian explained, “I think people are cautious, and they’re pulling back a little bit on travel—not in an organized manner, but just kind of waiting to see what’s going to transpire, whether it’s trade and tariff challenges or macroeconomic policy changes or just a little bit of the unsettledness of the market that we all see.”
The tariffs are also discouraging Canadian travelers from visiting the U.S., adding further strain on the industry. Travel experts warn that the trade wars could have severe economic consequences—just a 10% drop in Canadian visitors could lead to $2 billion in losses. Popular destinations like Florida, California, Nevada, and New York are expected to take the hardest hit.
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Another factor contributing to the slowdown is the reduction in government travel. Corporate travel has been affected, but federal budget cuts have significantly impacted government-related trips. United CEO Scott Kirby noted, “Government travel is about 2% of United’s business, but other workers’ travel is also affected, like consultants and contractors, which account for another 2% to 3%.”
Bastian told CNBC that contractors worried about potential job losses are unlikely to spend money on travel, especially during what is already the weakest season of the year.
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Airlines Cut Costs to Offset Slower Demand
In response to the downturn, airlines are taking steps to cut costs. Many are reducing capacity to account for the slump in bookings. Southwest has revised its free checked bag policy, while United announced plans to retire 21 planes early, saving an estimated $100 million in engine overhaul costs.
Despite the domestic slowdown, there is a silver lining—international travel remains strong, and spring travel projections look promising.
