Airline stocks nosedive as carriers cut fares and forecasts

In a bid to shore up their balance sheets, U.S. airlines are slashing fares and cutting back domestic flights — an early warning that the American consumer is feeling the pinch.

Airfares dropped 5.3% in March after a 4% slide in February, according to the Labor Department’s latest CPI report.

Executives say demand for domestic travel has fallen short in early 2025, as more Americans think twice about non-essential travel (discretionary spending).

In response, Delta (DAL), United Airlines (UAL), and Southwest (LUV) have all announced plans to scale back domestic flight growth in the second half of the year.

United, Southwest, and Alaska Airlines (ALK) have also withdrawn their full-year forecasts, citing increased difficulty in reading the economic tea leaves.

Airlines are often among the first to feel the sting when consumer confidence fades. And confidence is fading fast.

In April, 72% of Americans said a recession is likely within the next month, the highest level in two years, according to the latest Conference Board survey.

“Such a pessimistic view of the economy and financial situation will likely lead to more pullback in consumer spending,” noted the Kobeissi Letter, “which could further dent air travel.”

Investors bail on airline stocks

Airline stocks are among 2025’s biggest losers. The S&P 500 Airlines Industry Index is down 23.7% year-to-date, way below the broader market’s 3.5% decline.

Even more striking is the fact that this underperformance factors in a 19% rebound in airline stocks over the past month.

Delta shares are down nearly 25% in 2025, with Delta CEO Ed Bastian warning of an uncertain future ahead as both consumer and corporate bookings remain soft.

Like many industry leaders, Bastian initially welcomed Trump’s return to office last fall but has since slammed the administration’s tariff moves, calling them “the wrong approach.”

American Airlines (AAL) is the worst-performing major U.S. carrier this year, down more than 37%. The company reported a $473 million loss last quarter, up from $312 million in the same period last year.

American Airlines CEO Robert Isom said demand for domestic leisure travel “fell off considerably as we went into the February time frame,” just as Trump reignited his trade-war rhetoric.