On Tuesday, U.S. airline stocks plummeted to their lowest levels since late last year due to economic concerns, marking a significant downturn in what had been a positive trend for consumer spending. This decline follows President Donald Trump’s imposition of new tariffs on Mexico and Canada, as well as increased tariffs on Chinese goods, prompting retaliatory actions. Executives from companies like Best Buy and Target have cautioned that these tariffs could lead to higher prices for consumers.
United Airlines and Delta Air Lines both experienced a drop of around 6%, while American Airlines saw a decrease of nearly 4%. Domestic airlines such as JetBlue Airways lost almost 6%, Allegiant Air fell over 9%, and Frontier Airlines ended more than 4% lower. The airline industry, particularly full-service carriers with extensive international networks, had previously been performing well due to strong demand and stable domestic flight growth. However, analysts are now predicting potential impacts on demand, especially among price-sensitive customers, as the crucial spring travel season approaches.
Recent reports from the U.S. Commerce Department revealed a decline in consumer spending in January, the first decrease in almost two years. The retail sales report from the previous month also showed a larger-than-expected drop. Deutsche Bank expressed concerns about a potential economic slowdown and its impact on air travel demand, particularly within the domestic discretionary segment.
Despite these challenges, United Airlines CFO Mike Leskinen noted that international leisure travel remains strong, while domestic leisure travel is steady. Delta Airlines experienced a temporary decline in domestic demand due to factors like reduced government travel, adverse weather conditions, and recent aviation incidents. However, the carrier reported strong spring break bookings and robust international demand, particularly for U.S.-Europe trips.
