Airline stocks extended their slide on Tuesday as Wall Street grew increasingly concerned about weaker-than-expected travel demand, ongoing economic uncertainty, and the impact of looming tariffs.
Investors are bracing for a difficult earnings season, with some major carriers already cutting profit forecasts.
Shares of Delta Air Lines fell roughly 5% in morning trading after Jefferies downgraded the airline from “buy” to “hold,” nearly halving its price target to $46.
The downgrade follows Delta’s recent decision to cut its first-quarter guidance, signalling challenges ahead.
The investment bank also warned that Delta is likely to reduce its 2025 forecasts, particularly as demand from price-sensitive travellers declines.
Delta executives, however, remain optimistic about the airline’s ability to generate revenue from premium cabins and its lucrative credit card partnership with American Express.
Jefferies also lowered its ratings for American Airlines, Southwest Airlines, and Air Canada, citing declining demand for domestic and cross-border travel.
American Airlines was down by 2.8%, while Southwest Airlines was down by more than 4% on Tuesday.
United Airlines was the only US carrier to retain a “buy” rating, though its price target was also slashed by 48%.
Spending on airlines declines by 7.2%
Airline executives attending a JPMorgan industry conference in mid-March expressed concerns about a slowdown in domestic travel, which remains the backbone of the US airline industry.
Consumers are tightening their spending as inflation remains high, and many travellers appear hesitant to book trips amid economic uncertainty.
A Bank of America report last week indicated that overall US household credit and debit card spending increased by 1.5% year over year as of March 22.
However, spending on airlines declined by 7.2%, reflecting a shift in consumer priorities.
On Monday, the Bank of America Institute wrote in a report that the decline in travel card spending “could be that the recent drop in consumer confidence is translating into people hesitating to book trips, or considering paring them back” but added that “bad weather and a late Easter this year are also likely playing a part.”
Airline stocks suffer worst quarterly drop since 2023
The NYSE Arca Airline Index, which tracks major US airlines, fell nearly 17% in the first quarter of 2025.
This decline outpaced the broader S&P 500’s drop and marked the index’s worst performance since the third quarter of 2023.
Rising economic uncertainty has prompted businesses and tourists alike to scale back travel budgets, forcing airlines to lower their first-quarter profit projections.
With air travel considered a discretionary expense, analysts warn that any prolonged economic slowdown could further dampen demand.
“Your first needs are food and shelter. And then, we’re a little bit down the list of expenditures,” said David Neeleman, CEO of low-cost carrier Breeze Airways.
“If you don’t have a job, you’re not going to go buy an airline ticket.”
Cross-border travel between Canada and the US plunges
The travel downturn is particularly severe between Canada and the US.
Forward bookings for flights between the two countries have dropped by as much as 75% compared to the same period last year, according to global travel data provider OAG.
Land border crossings between Canada and the US also fell sharply.
In February, the number of Canadians entering the US via land border crossings declined by nearly 500,000 compared to 2024, reaching levels not seen since the peak of Covid-19 border restrictions.
Similarly, the number of Canadian residents returning from the US by air fell by 13.1% in February.
Air Canada, WestJet, and United Airlines have responded by cutting flights between the two countries, citing weak demand.
Safety concerns add to industry woes
Beyond economic pressures, airline safety concerns have also contributed to declining travel demand.
Data from Amanda Demanda Law Group shows that public concern over air travel safety hit an all-time high in February, with Google searches for “Are planes safe now?” surging by 900%.
This unease is reflected in ticket sales.
According to Airlines Reporting Corp data, air tickets sold through US travel agencies fell 8% in February compared to the previous month.
Both corporate and leisure travel bookings declined, exacerbating airlines’ financial struggles.
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