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Airline stocks suffered steep losses today as shareholders contemplated the impact of tariffs on travel.
United Airlines (UAL+0.27%) led the sector’s stocks in losses, cratering over 13% in midday trading. Allegiant Travel Company (ALGT-2.15%) was not far behind, falling more than 12%. Allegiant’s business is heavily dependent on leisure travel, which experts fear may see a drop as consumers cut back. Sun Country Airlines and Frontier Airlines also depend on the leisure segment, and both saw their stock sink more than 10% midday.
The plunge in airline stocks mirrors stocks across the hospitality sector from cruise lines to hotels.
Airlines were already bracing for a rough spring, with investment bank Jefferies (JEF+2.36%) issuing a warning about the sector earlier this year. The firm blamed the dour outlook for airline stocks on declining consumer and corporate confidence along with fears about tariffs.
“Consumer sentiment continues to disappoint, now at 4-yr lows, and tariffs take effect this week after delays affecting business confidence,” the report said, adding that “GDP-driven businesses like airlines are in for short-term pain.”
Last month, Delta Air Lines (DAL-1.15%) slashed its profit outlook for 2025 by 50 percent. Southwest Airlines (LUV-1.85%) responded to softening revenue by instituting checked bag fees for the first time in its history. And Delta chief executive Ed Bastian referred to the steady drip of bad news as “a parade of horribles.”
While U.S. tariffs won’t apply directly to the cost of an airline ticket, Julian Kheel, founder and CEO of Points Path, which helps steer frequent flyers towards the best deal, told Quartz that if they cause an overall slowdown in the economy, airlines will certainly be affected as well.
“Rising prices across the country are likely to cause consumers to curtail spending, which will impact travel demand,” Kheel said, adding that this is why we’ve already seen a significant drop in airline stocks this year
“It’s still early and the picture is mixed so far, but it’s also possible that travel demand from overseas to the U.S. could take a hit,” Kheel said, noting that airlines such as Delta, United, and Virgin Atlantic have reported softening demand in recent weeks for travel from international visitors.
“If demand drops, airlines are likely to cut back on flights in an effort to keep prices stable. That means travelers may find fewer options available to get to their destination,” Kheel said.
He added that tariffs could hit airlines through increased maintenance costs.
“Airlines are also likely to see increased costs on replacement parts for their planes, many of which are manufactured overseas, and could choose to pass those costs along to travelers in the form of higher prices,” Kheel said, noting that the modern aviation industry is extremely complex, with thousands of suppliers across dozens of countries.
“With so many moving pieces, it’s difficult to predict with certainty what the net impact of tariffs will be. But it’s indisputable that tariffs will have a domino effect across the travel world,” Kheel said.