United, Delta cut capacity as tariffs impact travel demand

Business Journals

24-04-2025

Concerns about the economy's direction amid a trade war are reshaping both leisure and business travel.
Some major U.S. airlines are cutting capacity and growth plans in response to a shifting economy.
Consulting giant Deloitte said in its 2025 travel outlook the inflationary impact of significant tariffs recently imposed by the Trump administration could be a drag on otherwise strong travel demand. As a tariff-heavy trade policy from President Donald Trump has taken shape since then, a late-March report issued by Deloitte said consumers have expressed less interest in discretionary spending.
Chicago-based United Airlines Holdings Inc. (Nasdaq: UAL) CEO Scott Kirby said during a recent conference call with investors the weaker economic environment has led to softer travel demand.
UNLOCK EVERY ARTICLE
Get Started For Only $9
GAIN ACCESS TO EVERY LOCAL INSIGHT, LEAD AND MORE!
Become A Member
Meanwhile, international travel to the U.S. has flagged as well. Non-citizen international air-travel arrivals to the U.S. were down 9% year-over-year in March, before full details of the tariff policy were known, according to the International Trade Administration.
In response, two major airlines so far — Atlanta-based Delta Air Lines Inc. (NYSE: DAL) and United — have said they are reducing planned capacity increases later this year. United has also accelerated the retirement of some of its aircraft, and its domestic capacity growth will be 4 percentage points lower than its original plan for the year, Chief Financial Officer Mike Leskinen said on the company's first-quarter earnings conference call.
Delta, meanwhile, will keep its capacity in the second half of the year flat with the prior year, which is also a decrease from prior expectations, said President Glen Hauenstein on the company's recent earnings conference call.
The hit to demand has been particularly heavy among visitors from Canada, which was among the first countries targeted by the Trump administration's tariffs. Aviation-analytics company OAG reports flight bookings from Canada are down more than 70% for every month from April to September when compared to last year, reported The Business Journals' Joanne Drilling.
Hauenstein said Delta has also seen 'a significant drop-off in bookings' from Canada and a 'mixed bag' from Mexico, which was also initially targeted for tariffs alongside Canada. As of now, goods compliant with the United States-Mexico-Canada Agreement are not subject to higher tariffs.
'I think we will be looking at Canada and Mexico as places that we probably want to reduce our capacity levels as we move forward,' Hauenstein said.
United Chief Commercial Officer Andrew Nocella said on the airline's earnings call that passenger volume from Canada is down 9% year over year, and those originating from Europe are down 6%.
Domestic travelers opt for budget-conscious trips
For travelers within the U.S., any changes on planned air travel has more to do with economic uncertainty.
About 29.6% of respondents to Morning Consult's consumer sentiment survey, as of April 21, said right now is a bad time to make a major household purchase, up from about 24% at the start of the year. Consumer sentiment has worsened overall amid the back-and-forth rollout of the new tariffs.
"Economic uncertainty is going to affect how tightly people hold onto their wallets," said Mallory Dumond, a supervisor for travel agency Travelmation LLC. "Discretionary spending is not going to be going to first-class airfare to Europe, or any sort of leisure travel."
Anecdotally, Dumond said she is seeing her own clients opt for road trips rather than air travel.
There's a similar dynamic at play on the business-travel side, as companies preparing for a downturn will be looking to cut costs as much as they can.
Larger airlines have started consolidating their operations into hubs, seeking greater efficiency, Dumond said. That leaves smaller regional airports for lower-cost carriers. It has also created a general divide in how business and leisure travelers fly, she said. Leisure passengers are willing to make a longer drive to an airport with a better schedule of departures, while business travelers are sticking with the airports closest to them — and are more willing to forgo loyalty to a larger airline in favor of a budget option.
Get more stories like these every day in your inbox by subscribing to The National Observer newsletter.