The airline industry is bracing for turbulence as CEOs express concerns over the current state of the economy.
Delta Air Lines and Frontier Airlines recently revised their outlooks for 2025, citing an unclear economic forecast and a dip in immediate demand.
Executives from various airlines are noting a slowdown in bookings, particularly in the corporate sector. Contributing factors include President Donald Trump’s trade policies, layoffs at numerous government agencies, a decline in visitors from Canada and other countries, and a noticeable dip in demand for domestic coach seats as cost-sensitive travelers hesitate to commit to trips.
A recent survey by the University of Michigan reported a decline in consumer sentiment this month. Furthermore, a report from Bank of America highlighted a decrease in spending on non-essential services, such as dining and travel, experienced in February and March.
“It feels as if we are preparing for a recession,” Delta CEO Ed Bastian remarked during an appearance on Finance Newso’s “Squawk Box.” He noted, “Everyone appears to be adopting a defensive stance.”
This sentiment marks a stark contrast to Bastian’s earlier projections at the start of the year, where he anticipated 2025 to be the airline’s most profitable year yet.
Targeting Wealthy Travelers
In response, airlines are increasingly relying on affluent leisure travelers, who have been pivotal in driving record revenues post-pandemic. These airlines are optimistic that these consumers will continue to opt for more expensive, spacious seating options despite the current global and economic instability.
Spirit Airlines embraced a well-known quote from Parker Posey’s character in “The White Lotus” for an advertisement promoting its most comfortable seating. “I just don’t think at this age, I’m meant to live an uncomfortable life,” the airline paraphrased on its Instagram account alongside a photo of its “Big Front Seat,” which is priced at three times that of a standard seat in exchange for more comfort and amenities.
Carriers are banking on similar sentiments among other passengers.
For years, airlines and credit card companies have expanded luxurious airport lounges. They also compete to enhance their aircraft with upgraded premium seating, including suites with doors. Air France and Lufthansa have recently introduced spacious first-class cabins, while the demand for upgraded business and first-class seats, which contain numerous parts and require regulatory approval, is causing delays in new aircraft deliveries.
In light of the current climate, Delta and Frontier have announced plans to scale back their growth strategies, focusing on limiting capacity, especially on less busy domestic routes during certain weekdays, such as Tuesdays and Wednesdays.
Despite these changes, airline leaders express greater optimism regarding lucrative international routes and premium seating options like long-haul business class and premium economy.
“We’re noticing the largest impact on domestic routes, particularly in the main cabin, which is experiencing a downturn in both consumer and corporate travel,” Delta’s president, Glen Hauenstein, stated during a recent earnings call. “While we are not entirely shielded from this situation, we continue to see stronger performance in our international markets and diverse revenue sources, including premium services and loyalty programs, demonstrating the resilience of our primary consumer base.”
Delta has observed a marked increase in premium-segment revenues, such as first-class and premium economy on international flights, which is expected to continue growing. Hauenstein noted that premium revenues are expanding faster than those in the main cabin, with predictions of widening profit margins in the coming quarter.
United Airlines, Delta’s closest competitor, has a vast international network and has invested significantly in upscale refurbishments, high-end lounges, and enticing new destinations aimed at affluent travelers. Their quarterly results, set to be released this week, will provide further insights into consumer behaviors.
American, Southwest and other airlines are also slated to announce their earnings in the upcoming weeks.
International Travel Challenges
As airlines prepare for the potential influx of high-paying customers, challenges in international travel are also surfacing.
Delta and United have announced reductions in some of their Canada-U.S. flight services, mirroring remarks made by Canadian airlines, as demand for U.S.-bound travel declines—a trend likely to exacerbate the $50 billion international travel deficit in the United States.
According to the U.S. Commerce Department, non-U.S. citizen visitors to the United States numbered around 4.5 million last month, representing a nearly 13% decrease from 2019 and a nearly 10% drop from last year.
As demand weakens, airlines are expected to offer more promotions and fare sales throughout the spring, potentially leading to lower prices for popular international routes.
“This summer may be one of the best opportunities for travel to Europe that I’ve seen in years,” commented Scott Keyes, founder of the travel deal platform Going, formerly known as Scott’s Cheap Flights.
“Looking back at 2022, 2023, and 2024, I didn’t foresee much hope. However, things are now aligning favorably,” he added.
