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Yahoo
01-05-2025
- Business
- Yahoo
America's travel industry is in sharp decline
The travel and tourism industry, which accounts for about 3% of the U.S. GDP, has long been one of the economy's most robust sectors, particularly when it comes to trade: The U.S. had posted a trade surplus in travel every year this century. Until this year. A drop in foreign visitors to the U.S. caused the real value of exports of travel services to fall at a 7.8% annual rate in the first quarter, according to the GDP report released Wednesday. The U.S. Travel Association says the United States is now running an annual travel trade deficit of $50 billion, compared with a $3.5 billion surplus in 2022. 'This presumably reflects increased hostility by many foreigners to the U.S., as well as fear of harassment by ICE officers,' Dean Baker, senior economist for the Center for Economic and Policy Research, wrote in his note reviewing the first quarter GDP numbers. 'We will likely see further declines in future quarters, especially among students coming to study in the United States.' There has already been an 11% year-over-year decline in enrollment of foreign students between this March and last, according to the Institute of Educational Enrollment. The organization expects the drop to result in a loss of up to $4 billion in spending. Other data bears out the dour outlook for travel. The International Trade Association reported earlier this month that arrivals of non-citizens to the United States by plane declined by more than 11% since March 2024. Tourism Economics, a firm that tracks the hospitality industry, recently changed its forecast for foreign visitors to the U.S. to a 9.4% decline for the year, after projecting a 9% increase back in December. The firm estimates that international visitor spending in the United States will slide 5% as a result, a loss of $9 billion this year. 'Trump's policies and pronouncements have produced a negative sentiment shift toward the U.S. among international travelers,' the firm said. U.S. airlines are feeling the pain. Several recently changed their projections for the full year as tariffs, inflation, and shaky consumer demand forced a re-evaluation of 2025 expectations. The Dow Jones Airlines Index is off 30.17% year to date and the DJ Hotels Index has declined 14.12%, with both hitting 52-week lows on April 8. Not all the travel news is bad. Year-on-year comparisons of airline travel likely suffered this year because Easter fell in April, versus March in 2024, shifting holiday travel. An analysis by the New York Times (NYT) found that international arrivals at U.S. airports are down only 1.5% so far this year, and airlines say bookings to Europe from the U.S. are up. Booking Holdings (BKNG), the parent company of and Priceline, reported robust first quarter earnings on Tuesday, with bookings up 7% and revenue rising 8%. Still, CEO Glenn Fogel acknowledged in the firm's earnings statement that 'there is uncertainty in the market around the near-term geopolitical and macroeconomic environment.' The outlook for international travel does not look poised to improve, given that the first quarter GDP numbers did not take into effect President Donald Trump's April 2 announcement of steep tariffs on virtually every country. Tourism International, which attributed much of its lowered forecast for foreign travel to the U.S. to global fallout from Trump's 'America First' rhetoric, noted that 'the March data reflect foreign visitor patterns before the April 2 'Liberation Day' tariff announcement, which may draw further backlash.' It has clearly drawn backlash from Canada, where citizens have recoiled from Trump's talk of making it the 51st state. In March, the number of Canadians taking road trips across the U.S. border were 32% lower than March 2024, and there was a 13.5% decline in air travelers from Canada, according to Statistics Canada. Advance bookings for flights from the U.S. to Canada for the April to September period were off more than 70% from the prior year. For the latest news, Facebook, Twitter and Instagram.
Forbes
24-04-2025
- Business
- Forbes
‘Negative Bias': American Airlines Pulls 2025 Guidance, Citing ‘Significant Weakness' In Domestic Travel Demand
American is the second U.S. legacy airline to withdraw its financial guidance for 2025, dropping its prediction for how the company will perform this year amid economic uncertainty is bringing turbulence to the industry. American Airlines joined Delta in withdrawing its full-year guidance, citing uncertainty in the ... More economy. (Photo by Bruce Bennett) 'We're taking a very cautious, even a negative, approach to growth as we take a look out to the rest of the year,' American Airlines CEO Robert Isom told investors on the company's first-quarter earnings call Thursday, explaining how economic uncertainty impacted the carrier's ability to forecast for the full year. Even so, American said it expected to eke out a profit in 2025, while reporting a narrower-than-expected loss of 59 cents per share in the first three months of the year and quarterly revenue of $12.55 billion that was just above estimates. American Airlines stock–which is down 45% year to date–rose a little more than 1% after the earnings call. Earlier this month, Delta Air Lines became the first legacy airline to withdraw its full-year forecast and United Airlines offered two competing 2025 outlooks—one if the economy stabilizes and another if there is a recession. The Dow Jones Airlines Index has tumbled 30% since the beginning of the year. Shares of low-cost carrier Frontier Airlines are down 56% year to date. As recently as January, American was expecting 2025 to be a good year, forecasting 4.5% to 7.5% in revenue growth compared to 2024. But a shaky economy, exacerbated by President Donald Trump's tariffs, has introduced 'significant weakness in our main cabin demand, significant weakness among our most discretionary travelers,' American Airlines chief financial officer Devon May told investors. 'Right now there's uncertainty in the marketplace,' echoed Isom. 'What does that mean? It means that we don't hire as much. It means we don't bring out as many planes. Potentially, it means a reduction in overall economic activity. It's the same thing for the customer that's planning a vacation. Nobody relishes uncertainty.' 'Certainly this is not something we would intend to absorb, and I'll tell you, it's not something that I would expect our customers to welcome,' Isom said in response to a question of the impact of tariffs levied on aircraft. American Airlines' fleet is split nearly evenly between aircraft from Boeing and French manufacturer Airbus. $1.3 trillion. That's how much the U.S. travel industry generates in direct spending while supporting one in every 11 U.S. jobs. 'Anything that spurs demand for travel, both domestically and abroad, is something we will support,' Isom said. 'This starts with making America a welcoming destination for international travelers, especially in advance of major events like FIFA World Cup '26, of which we're a sponsor, and later the 2028 Olympic Games in Los Angeles.' It could mean lower fares on many domestic routes, as airlines adjust supply to align with demand. 'I'll tell you right now, we have a negative bias to all capacity,' Isom told investors. Acknowledging 'pretty significant weakness in the part of our business that's very sensitive to economic conditions,' American's chief strategy officer Steve Johnson added, 'In those circumstances, you do see prices that are lower….I think that's going to continue to be the case until we understand which direction the economy is going and we remove some of this uncertainty and some of that demand comes off the sidelines.' Whether the weak U.S. dollar will keep Americans from traveling overseas this year. American and other airlines have repeatedly cited the strength of the long-haul international market. But American travelers' appetite for foreign destinations could soon wane, given the greenback has tumbled more than 8% year to date, according to the DXY, an index that measures the dollar against a basket of foreign currencies. That means Americans are paying noticeably more when visiting abroad this year. The dollar is down 9% versus the euro, down 6% against the pound sterling and down 10% versus the Japanese yen since the beginning of the year. Even in North America, the U.S. dollar is down 4% and 6% against the Canadian dollar and Mexican peso, respectively. Airlines are bracing for disruption to domestic flying when the Transportation Security Administration (TSA) begins enforcing REAL IDs on May 7. Currently, up to 19% of passengers arrive at airports without REAL ID-compliant identification, according to TSA data. That means potentially between 400,000 and 513,000 passengers could be subject to additional screening every day in the first weeks of enforcement. Trump's Tariffs Sent U.S. Airline Bookings Into A Tailspin, New Data Show (Forbes)
Forbes
24-04-2025
- Business
- Forbes
American Airlines Pulls Its Full-Year Guidance Amid ‘Significant Weakness' In Domestic Travel Demand
American is the second U.S. legacy airline to withdraw its financial guidance for 2025, dropping its prediction for how the company will perform this year amid economic uncertainty is bringing turbulence to the industry. 'We're taking a very cautious, even a negative, approach to growth as we take a look out to the rest of the year,' American Airlines CEO Robert Isom told investors on the company's first-quarter earnings call Thursday, explaining how economic uncertainty impacted the carrier's ability to forecast for the full year. Even so, American said it expected to eke out a profit in 2025, while reporting a narrower-than-expected loss of 59 cents per share in the first three months of the year and quarterly revenue of $12.55 billion that was just above estimates. American Airlines stock–which is down 45% year to date–rose a little more than 1% after the earnings call. Earlier this month, Delta Air Lines became the first legacy airline to withdraw its full-year forecast and United Airlines offered two competing 2025 outlooks—one if the economy stabilizes and another if there is a recession. The Dow Jones Airlines Index has tumbled 30% since the beginning of the year. Shares of low-cost carrier Frontier Airlines are down 56% year to date. As recently as January, American was expecting 2025 to be a good year, forecasting 4.5% to 7.5% in revenue growth compared to 2024. But a shaky economy, exacerbated by President Donald Trump's tariffs, has introduced 'significant weakness in our main cabin demand, significant weakness among our most discretionary travelers,' American Airlines chief financial officer Devon May told investors. 'Right now there's uncertainty in the marketplace,' echoed Isom. 'What does that mean? It means that we don't hire as much. It means we don't bring out as many planes. Potentially, it means a reduction in overall economic activity. It's the same thing for the customer that's planning a vacation. Nobody relishes uncertainty.' 'Certainly this is not something we would intend to absorb, and I'll tell you, it's not something that I would expect our customers to welcome,' Isom said in response to a question of the impact of tariffs levied on aircraft. American Airlines' fleet is split nearly evenly between aircraft from Boeing and French manufacturer Airbus. $1.3 trillion. That's how much the U.S. travel industry generates in direct spending while supporting one in every 11 U.S. jobs. 'Anything that spurs demand for travel, both domestically and abroad, is something we will support,' Isom said. 'This starts with making America a welcoming destination for international travelers, especially in advance of major events like FIFA World Cup '26, of which we're a sponsor, and later the 2028 Olympic Games in Los Angeles.' It could mean lower fares on many domestic routes, as airlines adjust supply to align with demand. 'I'll tell you right now, we have a negative bias to all capacity,' Isom told investors. Acknowledging 'pretty significant weakness in the part of our business that's very sensitive to economic conditions,' American's chief strategy officer Steve Johnson added, 'In those circumstances, you do see prices that are lower….I think that's going to continue to be the case until we understand which direction the economy is going and we remove some of this uncertainty and some of that demand comes off the sidelines.' Whether the weak U.S. dollar will keep Americans from traveling overseas this year. American and other airlines have repeatedly cited the strength of the long-haul international market. But American travelers' appetite for foreign destinations could soon wane, given the greenback has tumbled more than 8% year to date, according to the DXY, an index that measures the dollar against a basket of foreign currencies. That means Americans are paying noticeably more when visiting abroad this year. The dollar is down 9% versus the euro, down 6% against the pound sterling and down 10% versus the Japanese yen since the beginning of the year. Even in North America, the U.S. dollar is down 4% and 6% against the Canadian dollar and Mexican peso, respectively. Airlines are bracing for disruption to domestic flying when the Transportation Security Administration (TSA) begins enforcing REAL IDs on May 7. Currently, up to 19% of passengers arrive at airports without REAL ID-compliant identification, according to TSA data. That means potentially between 400,000 and 513,000 passengers could be subject to additional screening every day in the first weeks of enforcement. Trump's Tariffs Sent U.S. Airline Bookings Into A Tailspin, New Data Show (Forbes)
