Economic uncertainty: Trump's tariffs shake airline industry
- Paul Aage Hegvik
- Mar 12
- 4 min read
Updated: Mar 14
Delta Air Lines has sharply cut its first-quarter profit forecast, blaming economic uncertainty worsened by former President Donald Trump's trade policies.
The airline is feeling the effects of weaker consumer spending and declining corporate travel, a trend that has intensified since Trump imposed a 25% tariff on Canadian steel and aluminum.
Shockwaves
The economic turbulence has according to Reuters sent shockwaves through the airline industry. Delta now expects earnings between $0.30 and $0.50 per share, a steep drop from its previous estimate of $0.70 to $1 per share. Revenue growth projections have also been slashed to just 3% to 4%, down from an earlier forecast of 7% to 9%. To put this in perspective, Delta earned $0.96 per share in the first quarter of 2023—meaning its current expectations could mark a decline of over 60%.
A ripple effect across the industry
Delta’s bleak outlook has rattled the stock market. After the announcement, Delta shares plunged 14%, dragging down competitors—United Airlines fell 11%, while American Airlines dropped nearly 9%. Budget carriers like Southwest and JetBlue, which rely more on domestic travelers, also saw their stock prices dip as investors worried about weakening consumer demand.
Citi analyst Stephen Trent told Reuters that while Delta’s forecast cut was disappointing, it wasn’t entirely unexpected. He pointed to a range of concerns, including a softening U.S. economy and the uncertainty surrounding tariffs, which have weighed on consumer confidence.
Meanwhile, travel industry expert Gary Leff, writing for View from the Wing, described Delta’s earnings cut as a warning sign for the broader economy. He noted that the airline’s projected 50% to 70% drop in earnings per share highlights growing volatility and consumer caution, adding: «This isn’t just about Delta—when travel demand slows, it’s often a sign that bigger economic trouble is ahead.»
Impact of tariffs
Trump’s recent decision to impose steep tariffs on Canadian steel and aluminum has fueled fears of a broader trade war. Industries that depend on these materials, including construction, manufacturing, and aerospace, are already feeling the squeeze. Delta, which relies on aircraft maintenance and new fleet investments, is one of many companies caught in the ripple effect. The uncertainty has contributed to a nearly 600-point drop in the Dow Jones Industrial Average, raising concerns about an economic slowdown.
As both businesses and consumers tighten their budgets, travel is often one of the first expenses to be reconsidered. Delta has acknowledged the slowdown, with CEO Ed Bastian noting that corporate travel budgets are shrinking while consumers are becoming more hesitant about discretionary spending.
Despite the struggles in the domestic market, Delta’s premium and international travel segments remain stable. The airline is now shifting focus to these areas in hopes of offsetting losses.
However, analysts warn that if economic pressures persist, more airlines may be forced to revise their financial forecasts in the coming months.
«Businesses are currently reducing travel expenditures, and consumers are hesitant to book flights given the prevailing uncertainties»
Temporary and long-term
Bastian says that approximately half of Delta's $500 million revenue shortfall in the first quarter is related to temporary issues such as weather disruptions and recent plane crashes, while the remaining half pertains to longer-term economic uncertainties that require attention.
He says about the potential for a recession that he don't feel it. «As you just said, we're growing 4%, not 8%. If it was a recession, we'd be down 10%, right? So you don't see it. I think there's a lot of uncertainty, but I still think there's cautious optimism that as the uncertainty starts to clear, then businesses are going to be ready and poised to start to grow.»
Southwest Airlines, another major U.S. carrier, has also adjusted its financial expectations in light of the current economic environment. The airline reduced its forecast for unit revenue growth in the first quarter, signaling concerns about a potential slowdown in travel demand. And, - Scott Kirby, CEO of United Airlines, have also observed reduced demand, especially from government-related clients, and noted a significant drop in Canadian travel to the US due to tariffs.
What does this mean for travelers?
If airlines continue to struggle with reduced demand, travelers could see major changes in pricing and availability. While lower demand often leads to cheaper fares, airlines may compensate by cutting routes, adding extra fees, or reducing perks on domestic flights. Business travelers, a key revenue source for airlines, may see fewer flight options as companies cut back on non-essential travel.
Ultimately, Delta’s struggles highlight a bigger question: Is this just a temporary dip, or a sign of deeper economic trouble ahead? If corporate spending and consumer confidence don’t rebound soon, the airline industry—and the broader economy—could be in for a turbulent year.
The adjustments by Delta and Southwest suggest that airlines are bracing for potential challenges ahead, reflecting a cautious outlook as they navigate an unpredictable economic landscape.
