The airline stocks continued to fall on Tuesday, as Wall Street became increasingly worried about the weaker than expected travel demand, economic insecurity, and the potential impact of tariffs.
Some major airlines have already cut their profit estimates, causing investors to prepare for a challenging earnings season.
Delta Air Lines shares fell 5% on the morning market after Jefferies downgraded it from “buy” (a good investment) to “hold”, nearly halving their price target of $46.
Delta recently cut its guidance for the first quarter, indicating challenges ahead.
Delta’s 2025 predictions are also likely to be reduced, especially as the demand for price-sensitive travelers declines.
Delta’s executives remain confident about their ability to earn revenue through premium cabins, and the lucrative partnership they have with American Express.
Jefferies has also reduced its ratings of American Airlines, Southwest Airlines and Air Canada due to a decline in demand for both domestic and international travel.
American Airlines’ Tuesday results were down 2.8% while Southwest Airlines saw a drop of more than 4%.
United Airlines is the only US airline to maintain a rating of “buy”, despite its target price being cut by 48 percent.
The spending on airline services has declined by 7.2%
Airlines executives at a JPMorgan conference held in March expressed concern about the slowdown of domestic travel. Domestic travel is the mainstay of the US aviation industry.
As inflation continues to rise, consumers are reducing their expenditures. Many travellers seem hesitant about booking trips in the face of economic uncertainty.
According to a Bank of America report released last week, the total US credit card and debit card expenditures increased 1.5% from March 22, 2009 over the same period in 2009.
The consumer’s priorities have changed, as spending on airline services has declined 7.2%.
The Bank of America Institute reported in its report on Monday that the drop in spending by travelers could be due to the recent decline in consumer confidence, which is causing people to delay booking trips or consider cutting back. However, it added that bad weather and an Easter that was late this year were also contributing factors.
The airline stocks have suffered the worst quarter-on-quarter decline since 2023
In the first quarter 2025, the NYSE Arca Airline Index (which tracks US major airlines) fell by nearly 17 percent.
The index has not performed as poorly since the third quarter 2023.
The economic uncertainties have led businesses to cut back on travel spending, and even tourists. This has forced airlines to reduce their profit forecasts for the first quarter.
Analysts warn that, since air travel is considered to be a discretionary expenditure, any extended economic slowdown may further reduce demand.
Your first necessities are food and housing. David Neeleman is the CEO of Breeze Airways, a low-cost airline.
If you do not have a regular job, then you will never buy an airplane ticket.
Travel between Canada and US plummets
Travel between Canada and US is especially affected by the travel slump.
According to OAG, a global provider of travel data, forward bookings between the countries fell by up to 75% in comparison to the same time period last year.
The number of land border crossings between Canada, the US and Mexico also dropped sharply.
The number of Canadians who entered the US through land borders in February declined by almost 500,000, compared with 2024. This is the lowest level since Covid-19’s border restrictions.
In February, Canadians returning by air from the US fell 13.1%.
Air Canada, WestJet and United Airlines responded to the weak demand by cutting flight between Canada and United States.
Industry woes are exacerbated by safety concerns
In addition to economic concerns, safety issues have contributed to the decline in travel demand.
According to data from Amanda Demanda Law Group, public concerns about air travel safety reached a new high in February. Google searches of “Are airplanes safe now?” jumped by 90%.
The ticket sales reflect this unease.
Airlines Reporting Corp reports that air ticket sales through US travel agents fell by 8% from the month before.
Bookings for both leisure and corporate travel have declined. This has exacerbated the financial difficulties of airlines.
As new information becomes available, this post Airline stock drops as weakening demand for travel fuels economic worries may be updated.
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