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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.
Executives at American Airlines, Delta Air Lines, Southwest Airlines and United Airlines on Tuesday acknowledged a softening in demand, spurred by a reduction in travel by government workers and consumer uncertainty about the US economic outlook.
The note of caution, coupled with several carriers trimming their financial guidance, triggered a sell-off in most airline stocks.
It also dragged down shares in the leisure industry, including theme park owners and holiday booking platforms as investors weighed the broader implications for consumer spending.
An easing of demand for air travel is a sign of a potentially wider decline in US consumer confidence, while the airlines’ warnings are one of the strongest signs so far that US President Donald Trump’s tariffs are eroding consumer and business sentiment.
American Airlines on Tuesday scaled back its revenue growth and earnings guidance for the first quarter, blaming the impact of one of its planes’ involvement in a mid-air collision over Washington in late January “and softness in the domestic leisure segment, primarily in March”.
Meanwhile, Scott Kirby, the chief executive of United Airlines, told a JPMorgan conference on Tuesday that he had observed weakness in the domestic market and expected a “tougher economic time ahead”.
Southwest Airlines chief executive Bob Jordan on Tuesday said it had lowered its guidance for revenue per available seat mile, an important industry metric, by 3 percentage points mostly because of weaker bookings driven by the macroeconomic environment.
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”.
Optimism among small businesses eased in February, a report released on Tuesday by the National Federation of Independent Business showed, the latest warning sign over the trajectory of the US economy.
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.
United’s Kirby said 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 2-3 per cent.
Spending by these customers was down about 50 per cent “and we’ve seen some of that bleed over into the domestic leisure market”, he said.
Kirby also noted a “big drop in Canadian traffic to go into the US”. The relationship between the two countries has been strained as Washington and Ottawa trade blows on tariffs.
Kirby said he expected United’s earnings to be “at the low end” of its guidance range.
Speaking at the same conference, Delta chief executive Ed Bastian said 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 added.
American shares closed 8.3 per cent lower on Tuesday, Delta fell 7.2 per cent and United dropped 2 per cent. Southwest shares rose 8.3 per cent as it announced plans to charge for checked baggage, reversing a policy that has been popular with customers but has denied it a potential additional revenue stream.
Shares of cruise operators had a volatile day, with some mounting a late rally to close higher. Theme park operator Walt Disney dropped 5 per cent, while Expedia tumbled 7.3 per cent and Booking Holdings fell 2.2 per cent.
