A view from the Delta Sky Club at Los Angeles International Airport, Sept. 2, 2022.
AaronP | Bauer-Griffin | GC Images | Getty Images
Airlines have a bird’s eye view of the economy, and CEOs are seeing clouds.
Delta Air Lines and Frontier Airlines pulled their 2025 outlooks last week, calling out a murky U.S. economic picture and weaker near-term demand.
Airline CEOs are warning about slowing bookings, including weaker corporate travel, citing President Donald Trump‘s trade war, mass government layoffs, fewer visitors from Canada and other countries, and more recently, weaker demand for domestic coach seats as price-sensitive consumers grow skittish about planning trips.
Consumer sentiment tumbled this month, according to a University of Michigan survey. Bank of America said in a report Thursday that consumer spending on “nice to have” discretionary services like restaurants and tourism slipped in February and March.
“I think we’re acting as if we’re going to a recession,” Delta CEO Ed Bastian told CNBC’s “Squawk Box” on Wednesday. “I think everybody is going into a defensive posture.”
It’s a sharp change from the start of the year, when Bastian said 2025 was set to be the “best financial year” in the century-old airline’s history.
Not ‘meant to live an uncomfortable life’
Now, airlines are banking even more on wealthier leisure travelers, a big driver of record revenue in the wake of the pandemic. They’re hoping those consumers will continue to treat themselves to pricier, roomier seats, despite global market turmoil and a more concerning economic picture.
Budget travel icon Spirit Airlines last week used a beloved line from Parker Posey’s North Carolinian character in “The White Lotus” in an ad for the carrier’s priciest and roomiest seats.
“I just don’t think at this age, I’m meant to live an uncomfortable life,” Spirit quoted on its Instagram account above a picture of its “Big Front Seat,” which can fetch three times the price of a standard seat in exchange for more legroom and other perks.
Airlines are hoping that other travelers share the sentiment.
Carriers and credit card companies for years have been expanding their plush airport lounges. Airlines have also been racing to outfit their planes with more premium seating, like suites with doors. Air France and Lufthansa recently unveiled new, spacious first-class cabins, and demand is so high for stepped-up first- and business-class seats, which have hundreds of parts and require regulator approval, that it’s holding up deliveries of new planes.
Delta and Frontier said they are pulling back their growth plans or even reducing capacity, especially for off-peak domestic trips on certain days of the week like Tuesday or Wednesday.
So far, executives are more optimistic about the expensive international routes and for seats like long-haul business class and premium economy.
“The impact has been most pronounced in domestic and specifically in the main cabin with softness in both consumer and corporate travel,” said Delta’s president, Glen Hauenstein, on an earnings call last week. “While not immune in this environment, we do continue to see greater resilience in international and our diversified revenue streams, including premium and loyalty, reflecting underlying strength of our core consumer.”
Delta has already seen premium-segment revenue such as first-class seats or premium economy on international long-haul trips, grow faster than main cabin. Hauenstein says that’s about to step up.
Premium revenue continues “to widen the lead over main cabin,’ he said. “So we’re expecting the spreads and the yields to actually widen in this next quarter as opposed to converge.”
United Airlines, which is Delta’s closest rival, has a sprawling international network and has invested heavily in high-end refurbishments, lounges and flashy new destinations aimed at wealthier, globe-trotting customers. That carrier will provide more insight into consumer trends when it reports quarterly results this week.
American, Southwest and other airlines report in the following weeks.
‘Stars are aligning’
Even as airlines have high hopes for higher-paying customers, there are problems brewing in international travel, too.
Delta and United have said they are paring back some of their Canada-U.S. flights, echoing comments from Canadian carriers as U.S.-bound travel demand falls, a trend that’s threatening to further widen the $50 billion U.S. international travel deficit.
Non-U.S. citizen visitor arrivals in the United States last month totaled about 4.5 million, down nearly 13% from 2019, before the pandemic, and down nearly 10% from last year, according to the U.S. Commerce Department.
Weaker demand is set to bring more deals, and airlines have run fare sales even through late spring. But it could even mean cheaper flights to popular international destinations.
“This is probably the best summer for Europe travel I’ve seen years,” said Scott Keyes, founder of travel deal site Going, formerly known as Scott’s Cheap Flights.
“I don’t think there would have been all that much hope for it in 2022, 2023 and 2024,” he said. “The stars are aligning to boost the odds.”
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