Airline losses expected as Trump's trade war lowers travel demand
This announcement follows a similar move by Delta Air Lines, which also retracted its full-year guidance.
Frontier cited a weakening in travel demand, forcing airlines to resort to fare discounts and promotions to attract passengers.
Given this unpredictable climate, the Denver-based carrier stated it could no longer stand by its previously issued 2025 outlook. Earlier this year, in February, Frontier had projected adjusted profits of at least $1.00 per share for the year and breakeven earnings of 7 cents per share for the first quarter.
The ongoing trade disputes initiated by the Trump administration have created turbulence in global markets, impacting both business and consumer confidence. Travel, often considered a discretionary expense, is particularly vulnerable to economic anxieties.
These growing concerns have cast a shadow over the airline industry's prospects, contributing to a decline in airline stocks.
Weakening consumer demand has also undermined the industry's pricing power. Airline fares fell 5.3 per cent in March from a month ago, posting their steepest monthly decline since September 2021, according to data from the US Labor Department.
Frontier's shares fell about 12.5 per cent on Thursday and have shaved off half their value so far this year. Shares of Southwest (LUV.N), Alaska (ALK.N), Delta, United (UAL.O) and American Airlines fell between 10 per cent and 14 per cent on Thursday.
The S&P 1500 Airlines index is down about 37 per cent so far this year, compared with the wider S&P 500's 10.43 per cent drop.
Battered global markets and anxious global leaders welcomed Wednesday's reprieve when Trump suddenly decided to freeze most of his hefty new duties for 90 days.
But the selloff resumed on Thursday amid fears of a worsening trade war with China. Frontier said it expects a modest 5 per cent revenue growth in the first quarter, adding it would continue to monitor demand and adjust capacity as needed.
It has cut capacity, or the seats available on flights, for the June quarter to avoid lowering fares and protect margins. It now expects a low single-digit year-on-year decline in capacity in the second quarter.
Frontier expects an adjusted quarterly loss in the range of 20 to 24 cents per share, compared with analysts' average estimate of a loss of $0.03 per share, according to data compiled by LSEG. The company will report its quarterly earnings on May 1.
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