Airline stocks fall as possible economic ‘soft patch’ raises demand concerns

U.S. airline stocks tumbled Tuesday to their lowest levels since late last year after data showed some economic concerns, hitting what had been a bright spot for consumer spending.

The moves also come after President Donald Trump imposed new tariffs on Mexico and Canada and raised tariffs on Chinese goods, actions that were met with plans for retaliatory duties. Some executives, including the heads of Best Buy and Target, warned the tariffs could mean higher prices for consumers.

United Airlines, which has the most exposure to China of the U.S. airlines, fell about 6%, along with Delta Air Lines. American Airlines dropped close to 4% for the day, while domestic-focused carriers JetBlue Airways lost nearly 6%, Allegiant Air shed more than 9%, and ultra-low-cost carrier Frontier Airlines ended more than 4% lower.

Airlines, especially full-service carriers with big international networks, had been a bright spot thanks to strong demand and moderating domestic flight growth, but some analysts are now anticipating potential demand impacts, particularly for more price-sensitive customers ahead of the crucial spring travel season.

U.S. consumer spending fell in January for the first time in almost two years, the U.S. Commerce Department said last week. Earlier in February, its retail sales report from a month earlier showed a bigger-than-expected drop.

“While we continue to remain constructive on the supply backdrop — which we still believe is favorable — our attention has shifted to what appears to be an emerging economic ‘soft patch,’” Deutsche Bank said in a note Tuesday. “To what extent and duration are not clear at the present, however, we do think it will likely weigh on demand for air travel, particularly the domestic discretionary segment.”

The bank said it has not seen any signs of weakness in corporate or long-haul international travel.

“Business is really robust,” United Airlines CFO Mike Leskinen said at a Barclays industry conference last month. “International leisure is very strong. Domestic leisure is kind of OK. It’s fine. It’s what we expected.”

Leskinen said that government travel, which accounts for about 2% of United’s revenue has “fallen off” after government layoffs and other cost-cutting measures since Trump took office.

Delta “saw softness” in domestic demand last month because of slower government travel, bad weather and in the wake of the deadly American Airlines regional jet collision in January, as well as Delta’s crash landing in Toronto last month, in which all survived, Raymond James said in a note on Tuesday.

The carrier’s spring break bookings were strong, however, as was near-term international demand, particularly for U.S.-Europe trips, Raymond James said following meetings with a Delta’s head of network planning and revenue.