Just weeks ago, U.S. airlines were soaring on optimism, fueled by strong travel demand and limited industry capacity that pointed to a prolonged profit surge. Now, economic turbulence—sparked by President Donald Trump’s sweeping tariffs and government spending cuts—has shaken that confidence, forcing carriers to slash first-quarter profit forecasts.

With discretionary travel at risk, concerns over sluggish economic growth and persistent inflation have darkened the outlook for the rest of the year. The S&P 500 passenger airlines index (.SPLRCALI) has plunged about 15% in 2024, significantly underperforming the broader S&P 500 (.SPX). Major carriers like Delta (DAL.N) and United Airlines (UAL.O) have each shed around 20% of their value, while low-cost airline Frontier (ULCC.O) has slipped 2%.

Travel Spending Takes a Hit

"Food and housing come first—air travel is further down the list," said David Neeleman, CEO of budget airline Breeze Airways. “If you lose your job, you’re not buying a plane ticket.”
In response to slowing demand, airlines have started cutting flight schedules to avoid slashing fares and eroding profit margins. Delta, United, American Airlines (AAL.O), JetBlue (JBLU.O), Allegiant (ALGT.O), and Frontier have all trimmed their April-June capacity. United’s CEO, Scott Kirby, warned of a significant industry-wide capacity reduction by late summer if demand remains weak.

Premium Travel Holds Up, But Safety Fears Loom

Despite the broader slowdown, high-end travel remains relatively stable, with United reporting an 8% year-over-year increase in international spring bookings. However, safety concerns following recent airline incidents have dampened consumer confidence. Searches for “Are planes safe now?” spiked by 900% in February, according to Amanda Demanda Law Group data.

Compounding the issue, U.S. consumer confidence in March hit its lowest point in over four years, with expectations for income, business conditions, and job markets sinking to a 12-year low, per a Conference Board survey. This uncertainty is reflected in travel behavior—airline ticket sales through U.S. agencies dropped 8% in February, after a 39% surge in January.
Pricing Power Weakens Amid Economic Caution

With demand softening, airlines are losing their ability to maintain higher fares. Ticket prices in February posted their first year-over-year decline in six months, per U.S. Labor Department data. Frontier CEO Barry Biffle acknowledged the shifting landscape, saying, “A slowdown is coming.”

Still, airlines are holding firm on full-year earnings targets—at least for now. Much hinges on summer travel, typically the industry’s most lucrative period.
Consumers and Businesses Cut Back on Travel

Even as jobless claims remain relatively stable, inflation is making travelers more cautious. Denver teacher Jacob Brown, 24, is cutting costs by flying less, avoiding hotels, and traveling only when necessary. On a recent Las Vegas trip, he took a red-eye flight home to skip an extra night’s stay. "I'm only traveling when the cost is rock-bottom," he said.

Credit and debit card spending on airlines fell 7.2% in February, the weakest in at least six months, according to Bank of America data. Business travel, another key revenue driver, is also feeling the squeeze. While the first quarter typically sees strong corporate bookings, demand has underwhelmed. Delta recently reported that its corporate booking growth slowed to low single digits, down from 10% year-over-year in January. United, meanwhile, noted that government travel bookings had dropped by half, with reduced public-sector spending rippling into domestic tourism.

Gabe Rizzi, president of corporate travel firm Altour, confirmed the trend, stating that bookings from financial services, technology, manufacturing, and government contractors have declined up to 10% from last year. "Government agencies and subcontractors are tightening their belts," he said.

With airlines bracing for a potential downturn, the industry faces a pivotal moment. If demand doesn’t rebound in the coming months, 2024’s anticipated golden era for air travel may be grounded before takeoff.