Trump tariffs "shock" US airlines - Travel demand shrinks, causing "economic turbulence"
US airlines were soaring toward a new golden age just two months ago, as strong travel demand boosted the prospect of multi-year profits.
But U.S. President Donald Trump's tariffs and a decline in government spending have dented that optimism. Tourists and businesses have cut spending amid growing economic uncertainty, forcing companies to lower their first-quarter profit forecasts.
As travel is a discretionary item for many consumers and businesses, the increasing likelihood of weak economic growth and high inflation has clouded the outlook for the remainder of the year.
The S&P 500 index of passenger airlines is down about 15% this year, while shares of Delta and United Airlines have fallen about 20% each in 2025.
With demand slowing, airlines have begun reducing flights to avoid fare cuts and protect profit margins.
Sector experts have warned of a major drop in capacity across the industry by the second half of August if demand does not recover.
Part of the slowdown in demand is also due to recent safety incidents. Data from Amanda Demanda Law Group shows that concerns about airplane safety reached an all-time high in February, with Google searches for the question "Are airplanes safe now?" increasing by as much as 900%.
Airlines expect the shock from the security incidents to fade soon. But they are less certain about the economic pressures.
US consumer confidence fell to its lowest level in more than four years in March, with future expectations for business, profits, and labor market conditions hitting 12-year lows.
Airline tickets sold through U.S. travel agencies fell 8% month-on-month in February, after a 39% increase in January. Corporate and leisure travel were down, Airlines Reporting Corp. data showed last week.
Annual passenger traffic growth slowed to 0.7% in March from 5% in January, according to data from the U.S. Transportation Security Administration.
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