Economic turbulence shakes US airlines as travel demand falters

U.S. airlines were flying high less than two months ago on talk of a new golden age, as strong travel demand and tight industry-wide capacity raised the prospect of a multi-year profit boom.

But President Donald Trump’s broad tariffs and a crackdown on government spending have upended that optimism. Tourists and companies have reduced spending amid rising economic uncertainty, forcing carriers to cut their first-quarter profit forecasts.

With travel a discretionary item for many consumers and businesses, growing odds of weak economic growth and high inflation have clouded the outlook for the remainder of the year as well.

The S&P 500 passenger airlines index (.SPLRCALI), opens new tab is down about 15% this year and widely underperforming the broader S&P 500 index (.SPX), opens new tab. Shares of Delta (DAL.N), opens new tab and United Airlines (UAL.O), opens new tab have fallen about 20% each this year. Discounter Frontier Airlines (ULCC.O), opens new tab is down 2%.

“Your first needs are food and shelter. And then, we’re a little bit down the list of expenditures,” said David Neeleman, CEO of low-cost carrier Breeze Airways, in an interview. “If you don’t have a job, you’re not going to go buy an airline ticket.”

With demand slowing, airlines have started culling flights to avoid lowering fares and to protect margins. Frontier (ULCC.O), opens new tab, Delta, United, American Airlines (AAL.O), opens new tab, JetBlue (JBLU.O), opens new tab and Allegiant (ALGT.O), opens new tab all trimmed their April-June quarter capacity in the past two weeks.

United CEO Scott Kirby has warned of a large drop in industry-wide capacity by the second half of August if demand does not rebound.

To be sure, bookings for premium and long-haul travel are holding up. United reported an 8% year-on-year jump in spring international bookings.

Some of the demand slowdown is also due to recent safety incidents. Amanda Demanda Law Group data shows airplane safety concerns reached an all-time high in February, with Google searches for “Are planes safe now?” up 900%.

Airlines expect the hit from safety incidents to fade soon. But they are less sure about economic pressures.