Is a recession brewing in row 33?
Airline CEOs this month warned Wall Street that passengers’ appetite for domestic trips is coming in lighter than they’d hoped once they set forecasts high firstly of 2025.
On a series of earnings calls, they said the explanations range from President Donald Trump’s whipsawing tariff policies to volatile markets and, most notably, economic uncertainty.
“No one really relishes uncertainty once they’re talking about what they might do on a vacation and spend hard-earned dollars,” American Airlines CEO Robert Isom said on a quarterly earnings call on Thursday.
Which means airlines have too many seats on their hands — again. Delta Air Lines, Southwest Airlines and United Airlines said they may in the reduction of their capability growth plans after what they still hope to be a robust summer travel season.
Delta, Southwest, Alaska Airlines and American Airlines pulled their 2025 financial outlooks this month, saying the U.S. economy is just too tough to predict immediately. United Airlines provided two outlooks, one if if the U.S. falls right into a recession and said it expects to be profitable in either scenario.
That’s resulting in cheaper plane tickets. Airfare fell 5.3% in March from last 12 months, in accordance with the Bureau of Labor Statistics’ latest data. Easter, a peak travel period that coincides with many school vacations, fell in March of last 12 months, though fares also dropped 4% in February this 12 months.
Adding to pressure, executives said, is slower-than-expected growth from corporate travel, which is facing the identical challenges many households are. Government travel plunged, too, amid the Trump administration’s cost cuts and mass layoffs this 12 months.
“If uncertainty pops up, the very first thing that goes away is corporate travel,” said Conor Cunningham a travel and transportation analyst at Melius Research .
Delta CEO Ed Bastian said on April 9 that corporate travel was trending up 10% 12 months on 12 months firstly of 2025, but that growth has since flattened.
Business travel is vital to major carriers because those customers are less price-sensitive and infrequently book last minute when tickets are more likely to be dearer.
The overhang of seats within the domestic skies is forcing airlines to chop prices to fill their planes.
Alaska Airlines warned Wednesday that weaker-than-expected demand will likely eat into second-quarter earnings. Chief Financial Officer Shane Tackett told CNBC that demand has not plunged, however the carrier has lowered some fares to fill seats.
“The fares aren’t as strong as they were within the fourth quarter of last 12 months and coming into January and first a part of February,” Tackett said in an interview Wednesday. “Demand remains to be quite high for the industry, but it’s just not at the height that all of us anticipated might proceed coming out of last 12 months.”
On the front of the plane, executives say demand is holding up much better, while U.S.-based customers are still flying overseas in droves.
But lingering concerns are still weighing on the industry.
“Certainty will restore the economy, and I believe it’ll restore it pretty quickly,” Isom said.
