Summer is typically a boom time for U.S. airlines, as schools close and vacation travel ramps up. But this year’s outlook is cloudier than usual, and investors are starting to take notice.
Airline stocks are in a bit of a pickle thanks to President Trump’s tariff policies, which have introduced a whole new laayer of economic uncertainty.
Both Delta Airlines (DAL) and American Airlines (AAL) have already pulled their full-year revenue and EPS forecasts.
And while the initial fears of a recession sparked by April’s reciprocal tariffs may have cooled somewhat, new data from the International Air Transport Association (IATA) suggest this summer isn’t shaping up to be a blockbuster for air travel.
Passenger traffic growth is expected to drop from 10.6% last year to 5.8% this year.
According to IATA, North American demand is slipping due to “travel hesitancy amid the uncertainty regarding tariffs, tightening migration policies, and efforts to reduce employment in the federal government.”
The broader economic picture isn’t helping either. Global GDP is forecast to slow to 2.5% in 2025, but the U.S. economy is expected to take a bigger hit, down a full percentage point to just 1.5%.
Meanwhile, international inbound travel to the U.S. has slumped, driven by “a growing wave of negative sentiment toward the U.S.,” per Oxford Economics.
That slump in demand is already showing up in prices. Airfare dropped 7.9% in April and 7.3% in May, according to the latest CPI report. That signals that airlines are being forced to compete harder for passengers.
And airline stocks have been hit hard:
- Delta is down 17.25 this year
- United Airlines (UAL) has lost 18.9%
- American Airlines (AAL) has plunged 35.9%
The selloff deepened Thursday after a tragic Air India crash involving a Boeing 787 Dreamliner — the same aircraft used by both United and American — sent their stocks further into the red.
The sector might avoid a crash landing
Despite a rough start to 2025, JPMorgan’s U.S. airline and aircraft leasing analyst Jamie Baker argues the industry is better prepared than in past crises.
“The airlines are in a much better liquidity position than they were during the 2008–09 financial crisis and the Covid pandemic,” he wrote in a recent note.
Even though JPMorgan has turned more bearish in the short term, Baker believes markets are underestimating how flexible the major carriers can be when it comes to raising capital.
And there’s at least one tailwind: Consumer confidence is climbing again. The Conference Board’s index jumped 12.3 points in May — the biggest monthly gain since March 2021.
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