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Three of the biggest US airlines have warned of a slowdown in domestic demand, prompting some of them to slash their revenue and earnings expectations for the first quarter in the latest sign of waning consumer confidence.
American Airlines on Tuesday scaled back its outlook, citing “softness” in demand for domestic leisure travel and the impact of one of its flights being involved in a mid-air collision over Washington in late January.
Meanwhile, the chief executive of United Airlines said he had observed weakness in domestic demand and expected a “tougher economic time ahead”.
The comments followed a profit warning by Delta Air Lines on Monday, which cited a decline in consumer and corporate confidence triggered by economic “uncertainty”. The revised outlook was one of the strongest signs so far that US President Donald Trump’s tariffs are eroding consumer and business sentiment.
An easing of demand for air travel is a sign of a potentially broader decline in US consumer confidence.
The Conference Board’s closely watched measure of US consumer confidence last month recorded its steepest decline since August 2021 with consumers’ short-term outlook for the economy falling below the threshold that usually signals a recession ahead.
American on Tuesday said that “the revenue environment has been weaker than initially expected due to the impact of Flight 5342 [which crashed in Washington] and softness in the domestic leisure segment, primarily in March”.
The company now expected “flat” year-on-year revenue growth and an adjusted loss of 60 to 80 cents a share this quarter. Two months ago, the company forecast revenue growth of 3 to 5 per cent and an adjusted loss of 20 to 40 cents a share.
United’s chief executive Scott Kirby told a JPMorgan industrials conference on Tuesday that the weakness in domestic demand “started with government”. Public sector clients account for about 2 per cent of the company’s business, with consultants, contractors and government-adjacent lines of working comprising a further 2 to 3 per cent.
Spending by these customers was “running down about 50 per cent right now, so a pretty material impact in the short-term”, he added. “And we’ve seen some of that bleed over into the domestic leisure market.”
Kirby also said there had been a “big drop in Canadian traffic to go into the US”. The relationship between the two countries is being tested since Trump announced tariffs on Canadian imports, prompting reciprocal action by Ottawa.
United did not put out an 8-K filing to update shareholders, which is required when there is a significant corporate event, but Kirby said he expected earnings “to be at the low end of our guidance range”. The company on January 21 said it expected adjusted earnings this quarter of $0.75 to $1.25 a share.
Delta’s chief executive Ed Bastian said on Tuesday morning at the JPMorgan conference that he expected all peers were “experiencing some flavour” of the weakness being observed across the industry.
“[I]n the face of the amount of macro uncertainty that’s out there, I think people are too cautious and they’re pulling back a little bit on travel,” he said, adding that customers were “waiting to see what’s going to transpire” on issues such as trade and tariffs and macroeconomic policy changes.
Another factor affecting demand was “the domestic, more price-sensitive . . . consumer”, he said.
American shares were down 0.5 per cent on Tuesday morning while United shares gained 0.5 per cent. Delta, which at one point had fallen more than 12 per cent in after-hours trading on Monday, was down 3.4 per cent shortly after Wall Street’s opening bell.
Shares of cruise line operators were also lower on concerns that the airlines’ warnings could bode poorly for other leisure industries.
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