The three biggest U.S. airlines issued dour near-term forecasts over the past two days, warning that travel demand would weaken as the economy slows and the Trump administration’s tariff policies would sap consumer sentiment.
Each of the three major U.S. carriers — Delta Air Lines (DAL) , American Airlines (AAL) and United Airlines (UAL) — updated investors on their first-quarter-profit forecasts heading into an industry event hosted by JP Morgan today in New York.
Smaller rivals including Southwest Airlines and JetBlue (JBLU) also published fresh near-term forecasts that indicated softening travel demand and weaker-than-expected profit.
“The first quarter is always, seasonally, the most difficult quarter of the year for our industry and historically somewhat tough to project,” Delta Chief Executive Ed Bastian told CNBC.
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“We saw in February a pretty significant shift in GDP sentiment and the output and the confidence signals that we monitor,” he added. “Consumer confidence is coming down a bit, as we all know, and that’s why the market is in the challenge that it is.”
United Airlines CEO Scott Kirby told an investor event in New York that the domestic U.S. market likely has room for only two premium carriers.
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The Atlanta carrier slashed the lower end of its Q1-profit forecast by 40 cents a share, and it now sees earnings around 30 cents to 50 cents a share.
American Airlines, meanwhile, said it expected a first-quarter loss of 60 cents to 80 cents a share, compared with its prior forecast in late January of a loss of 20 cents to 40 cents a share.
Airlines see travel demand softening
The Fort Worth, Texas, carrier also cited the impact on near-term sentiment of the Jan. 29 midair collision between American Airlines Flight 5342 and a U.S. Army helicopter over the Potomac River. The crash killed all 67 people on board as well as the three military personnel operating the UH-60 Blackhawk.
U.S. airlines have been a bellwether for discretionary spending in the three years that followed the pandemic-era trough in domestic and international travel. Record levels of passenger traffic and Transport Safety Administration screenings have been recorded over the past year.
Heading into opening months of 2025, however, each of the three major carriers is reporting a notable pullback in demand, with Delta planning fewer flights over the summer and United seeing what it called a “50% drop” in government-related travel.
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United Airlines CEO Scott Kirby, meanwhile, told the JP Morgan event that the Chicago carrier likely would remove “unprofitable” capacity in coming months. He also echoed concern about fading travel demand.
Southwest Airlines (LUV) , for its part, is planning to mitigate the expected revenue decline, which it estimates at 2% and 4% in Q1, by charging for bags. That’s the first time the Dallas airline has charged for checked bags.
“We have tremendous opportunity to meet current and future customer needs, attract new customer segments we don’t compete for today, and return to the levels of profitability that both we and our shareholders expect,” CEO Bob Jordan said in a statement.
Are airline mergers ahead?
United’s Kirby also suggested the industry’s challenges could lead to another round of consolidation, arguing that demand in the domestic market is sufficient to support only two premium carriers.
When asked how that might play out, Kirby said that New York-based JetBlue would be the obvious target candidate.
JetBlue and Spirit Airlines abandoned a $3.8 billion merger attempt in March of last year after the Justice Department under President Joe Biden sued to prevent the deal amid concern it would limit consumer choice and increase prices.
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Investors have been hoping that the Trump administration will prove more supportive for big corporate mergers, but new Federal Trade Commission Chairman Andrew Ferguson issued a memo last month that stressed enforcement “stability” over “wholesale rescission” of consolidation guidelines.
Delta Air Lines shares were marked 2.8% lower in early Tuesday trading, while American edged 0.25% higher and United gained 2.8%.
Southwest Airlines, meanwhile, jumped 10.5% on bets that its new baggage policy, which will end free check-ins for most passengers, will boost overall revenues.
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