Airline shares experienced a notable decline Tuesday as investors reacted to weaker travel demand and falling consumer confidence. Market participants worry that emerging tariffs coupled with lower spending are putting pressure on carriers. The sell-off reflects broader market unease within the airline sector. The market's reaction signals increasing sensitivity to economic shifts in the travel industry.
Delta Air Lines saw its shares fall over 3% in afternoon trading after a downgrade from Jefferies changed its rating from buy to hold. The carrier’s price target was nearly halved to $46. This revision follows a decision by Delta to lower its first-quarter guidance, and analysts expect the carrier to reduce its 2025 outlook in the near future.
Executives highlighted improvements in revenue from premium cabin sections and advancements related to their partnership with American Express. All eyes are on Delta’s upcoming earnings report scheduled for next Wednesday morning, which may provide further clarity on how the carrier is addressing these market challenges. Investor interest remains high despite these adjustments.
Other major carriers experienced similar declines. Shares of American Airlines dropped by around 3%, and Southwest Airlines suffered a decrease exceeding 5%. United Airlines, the only U.S. carrier with a favorable rating from Jefferies, saw its target reduced by 48%. Leaders are worried about domestic travel showing signs of slowdown, affecting the industry as a whole.
Recent spending data has added to growing concerns. Figures show that household credit and debit card use increased by 1.5% compared to last year as of March 22, and expenditures on air travel declined by 7.2%. A report from a major financial institute suggested that lower consumer confidence has led to hesitancy in booking trips. Unsettling weather and a delayed Easter schedule appear to be contributing factors in this shift.
The performance of airline stocks has fared poorly this quarter. The NYSE Arca Airline Index, which tracks many U.S. carriers, dropped 18% during the first quarter. This figure surpasses the decline of the S&P 500 and marks the most significant fall since the third quarter of 2023. A recent update confirmed the 18% drop, correcting earlier misinformation. Investors remain alert to potential shifts in market dynamics as airlines work to manage the ongoing pressures from lower travel demand and changing customer behaviors.
