Airlines warn of decrease in domestic flights amid trade war concerns

The impact of President Trump’s tariffs on the U.S. economy is evident as Southwest Airlines announced a reduction in domestic flights this year. Despite being a domestic carrier, Southwest is feeling the effects of global trade tensions, with expectations of second-quarter revenue either remaining flat or declining by up to 4%. This downward trend was similarly reflected by other airlines like American Airlines and Delta Airlines, both of which revised their 2025 guidance outlook following their Q1 earnings reports.

Southwest Airlines managed to post better-than-expected Q1 numbers, reporting revenue of $6.43 billion, slightly exceeding the $6.40 billion consensus estimate. Despite a 1.6% year-over-year revenue increase, Southwest’s adjusted loss per share of 13 cents was better than anticipated. However, Southwest’s stock has suffered a 21.9% decline year to date and a 24.3% decrease over the past month, coinciding with the implementation of Trump’s tariffs.

American Airlines CEO Robert Isom noted a drop-off in bookings starting in February, just a month after Trump assumed office. The company’s Q1 revenue of $12.55 billion fell slightly below the $12.6 billion consensus estimate, with an adjusted loss per share of 59 cents, slightly improving from the expected 65-cent loss. American Airlines projected Q2 revenue to fluctuate from down 2% to up 1% year over year, as opposed to Wall Street’s 2.2% growth projection. American Airlines shares declined by 44.6% year to date and 16% over the past month.

Delta Airlines also adjusted its forecast, now anticipating flat revenue in the latter half of the year after initially expecting 4% growth. Delta’s stock experienced a 31.5% decrease year to date and a 14.8% decline over the past month, reflecting the broader impact of the trade war on airline companies.

Before the recent tariff escalation, U.S. airline stocks were already under pressure due to reduced discretionary spending and escalating recession fears under the current administration. Additionally, airlines are faced with the risk of anti-American sentiment resulting from Trump’s divisive politics and “America First” agenda, which have strained relationships with allies. Michael Feroli, chief U.S. economist at J.P. Morgan, highlighted a 5% decrease in international visitors to the U.S. compared to the previous year, potentially influenced by negative perceptions of recent trade policies and political decisions.

Overall, the challenges faced by U.S.-based airlines go beyond the direct economic impact of tariffs to encompass broader geopolitical sentiments and economic uncertainties triggered by the current administration’s policies. The airline industry is closely monitoring these developments for further indications of how the trade war and political climate will shape the future of domestic and international air travel.