Could economic turmoil be looming for the airline industry?
This month, airline executives cautioned Wall Street about a notable dip in consumer interest for domestic travel, a disappointing trend for which they had anticipated more robust demand as they reported earnings for the first quarter of 2025.
During a series of earnings calls, CEOs attributed this downturn to a variety of factors, including President Donald Trump’s fluctuating tariff strategies, unstable market conditions, and primarily, growing economic uncertainty.
“No one particularly enjoys uncertainties when contemplating vacation plans and how to spend their hard-earned money,” stated Robert Isom, CEO of American Airlines, during a quarterly earnings call on Thursday.
This situation suggests that airlines are again facing an oversupply of available seats. Major carriers such as Delta Air Lines, Southwest Airlines, and United Airlines announced plans to reduce their anticipated capacity growth after expressing hope for a strong summer travel season.
In a significant move, Delta, Southwest, Alaska Airlines, and American Airlines have withdrawn their financial forecasts for 2025, citing an unpredictable U.S. economic landscape. United Airlines, however, has simultaneously provided two potential outlooks—one assuming a recession and affirming profitability in either scenario.
This economic climate is contributing to a decline in ticket prices. The Bureau of Labor Statistics reported a 5.3% decrease in airfare in March compared to the previous year. The drop came during the Easter travel period, which saw a similar decline of 4% in February this year.
Furthermore, executives noted that the anticipated rebound from corporate travel has not materialized as quickly as expected, reflecting challenges faced by many households. Additionally, government travel has sharply declined due to expenditure cuts under the Trump administration and widespread layoffs.
“In times of uncertainty, corporate travel is often the first area to see reductions,” commented Conor Cunningham, a travel and transportation analyst at Melius Research.
Delta’s CEO, Ed Bastian, acknowledged on April 9 that corporate travel was initially up 10% year over year at the beginning of 2025, but that growth rate has since stalled.
Corporate travelers are crucial for airlines, as they tend to be less sensitive to price fluctuations and usually book last-minute flights, which are typically more expensive.
The oversupply of seats in domestic flights is compelling airlines to reduce fares to ensure their planes are filled.
On Wednesday, Alaska Airlines indicated that lower-than-expected demand could negatively affect its earnings for the second quarter. Chief Financial Officer Shane Tackett informed Finance Newso that while demand hasn’t plummeted, the airline has had to reduce some ticket prices to attract passengers.
“Fares are not as robust as they were in the latter part of last year and the beginning of this year,” Tackett remarked in a Wednesday interview. “While demand remains strong within the industry, it simply isn’t at the height we all anticipated following last year’s trends.”
At the premium end of the market, airline executives report that demand is holding steady, with U.S. travelers continuing to fly internationally in significant numbers.
However, persistent uncertainties continue to cast a shadow over the aviation sector.
“Restored certainty will rejuvenate the economy, and I believe that recovery will be swift,” Isom added.
