Keep the barf bags handy, people. We’re running into some serious economic weather.
President Donald Trump’s tariff plans have been causing turbulence in the airline industry.
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A good chunk of the world is none too pleased with America right now, including our neighbors to the north, who aren’t happy with Trump’s tariffs or his desire to make Canada the 51st state.
Canadians’ leisure travel bookings to American cities dropped 40% in February from a year ago, according to Canadian travel agency Flight Centre Travel Group Canada. The group said in March that one in five of its customers canceled a trip to the U.S. over the past three months.
Analysts have reworked their price targets for American Airlines’ parent. (Photo by Kevin Carter/Getty Images)
Delta Air’s Bastian: Tariffs ‘wong approach’Â
There are also inflation worries and a tumbling stock market and you can see why air carriers are getting a little airsick. Â
(Duly noted: Stocks were surging at last check after Trump announced a 90-day pause on tariffs for most countries but increased the levies on China.)
On April 9 Delta Air Lines (DAL)  CEO Ed Bastian called Trump’s tariffs “the wrong approach,” CNBC reported. The carrier cut its growth plans and said it can’t affirm its 2025 financial guidance.
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Last month, Delta lowered its first-quarter forecast due to weaker-than-expected demand for corporate and leisure travel.
“With broad economic uncertainty around global trade, growth has largely stalled,” said Bastian, who had stated in November that Trump’s approach to industry regulation was a “breath of fresh air,”
“In this slower-growth environment, we are protecting margins and cash flow by focusing on what we can control,” he continued.Â
“This includes reducing planned capacity growth in the second half of the year to flat over last year while actively managing costs and capital expenditures.”Â
Analysts adjust American Air price targets
American Airlines’ parent, AAL (AAL) , is also losing altitude. The shares are down 47% since January and off roughly 34% from a year ago.
Investment firms have been adjusting their price targets for American, something that TheStreet Pro’s Stephen Guilfoyle learned early on the morning of April 8.
“The news crossed my tape at precisely 04:27 ET this morning,” the veteran trader wrote in his recent column. “I posted it to Twitter (or X) a few minutes later.”
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It seems that Goldman Sachs analyst Catherine O’Brien had downgraded American Airlines to sell from neutral, halving her price target to $8.
“O’Brien cited the firm’s higher balance sheet leverage and operating leverage as risks that could drive significantly larger cuts made to estimates relative to industry peers, as uncertainties cloud the nation and planet’s economic and geopolitical futures,” Guilfoyle said.
Veteran trader points to cash flow losing streak
As profitability across the industry and at American is hurt by lower demand, O’Brien is now forecasting lower free cash flow.
“American Airlines has posted positive free cash flow for five consecutive years,” said Guilfoyle, whose career dates back to the floor of the New York Stock Exchange of the 1980s. “For 2024, that number was an impressive $1.3 billion.”
“But … for the fourth quarter free cash flow printed at -$342 million. For the third quarter, FCF landed at -$191 million, so there is a losing streak going here, at least sequentially,” he added.
Meanwhile, Susquehanna analysts slashed the investment firm’s price target on American Airlines to $10 from $18 and kept a neutral rating on the shares as part of a Q1 preview for the airline group.Â
Messaging around demand “needs to be clear” as investors “look to tease out leisure and business bookings into the spring and summer,” the firm said.Â
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Susquehanna said that while stock valuations are “clearly undemanding,” the firm prefers carriers with structural advantages already in place and a track record of extracting value from their networks.Â
Citing uncertainty about demand, Susquehanna reduced fiscal 2025 and 2026 estimates for the airlines.
American Air, which is scheduled to report quarterly results later this month, beat Wall Street’s fourth-quarter earnings expectations in January. But the stock tumbled after its first-quarter-earnings outlook fell short of analysts’ estimates.
Guilfoyle said that Wall Street was calling American Airlines to post an adjusted loss of 67 cents a share, wider than the loss of 34 cents a share a year earlier.
“I have found eight sell-side analysts that cover AAL,” he said. “All eight have cut their estimates for the quarter for this firm since the start of said quarter.”
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