US airline CEOs have warned Wall Street about lower-than-expected domestic flight demand, initially projected for early 2025. Several factors contribute to this, including unpredictable trade policies and market volatility, with economic uncertainty being the most significant. American Airlines' CEO, Robert Isom, highlighted the impact of uncertainty on holiday planning and spending decisions.
This situation is causing airlines to confront excess capacity again. Delta Air Lines, Southwest Airlines, and United Airlines have indicated plans to cut back on capacity growth after the summer travel peak, despite expecting strong summer demand. Delta, Southwest, Alaska Airlines, and American Airlines have all withdrawn their 2025 financial forecasts, citing the challenging US economic landscape.
Airfare prices have become more affordable, with a 5.3% year-over-year decline in March, according to the US Bureau of Labor Statistics. Lower-than-expected corporate travel growth is adding pressure, with businesses facing similar challenges as households. Additionally, government travel has decreased significantly due to cost cuts and layoffs under the Trump administration.
Delta CEO Ed Bastian noted a 10% increase in corporate travel growth by early 2025, but this momentum has since slowed. Business travel is crucial for major airlines due to less price sensitivity and last-minute bookings, often at higher prices.
Alaska Airlines recently warned that lower-than-expected demand might impact second-quarter earnings. CFO Shane Tackett mentioned that while demand hasn't drastically dropped, ticket prices have been lowered to fill seats. Meanwhile, first-class demand remains strong, and many US travelers continue to choose international destinations.
