Is a recession brewing in row 33?

Airline CEOs this month warned Wall Street that passengers’ appetite for domestic trips is coming in lighter than they had hoped when they set forecasts high at the start of 2025. On a series of earnings calls, they indicated that reasons range from fluctuating tariff policies to volatile markets and, most notably, economic uncertainty.

“Nobody really relishes uncertainty when they’re discussing potential vacations and spending hard-earned dollars,” American Airlines CEO Robert Isom said on a quarterly earnings call on Thursday. This leads airlines to face an oversupply of seats once more. Delta Air Lines, Southwest Airlines, and United Airlines announced plans to scale back their capacity growth after what they still hope will be a strong summer travel season.

Delta, Southwest, Alaska Airlines, and American Airlines withdrew their 2025 financial outlooks this month, citing difficulties in predicting the U.S. economy right now. United Airlines provided two outlooks: one assuming a recession and one without, and mentioned that they expect to remain profitable in either scenario.

This situation is contributing to lower airfare prices. According to the Bureau of Labor Statistics’ latest data, airfare fell 5.3% in March compared to last year. Easter, a peak travel period coinciding with many school vacations, occurred in March of last year, although fares also dropped by 4% in February this year.

Further complicating the landscape, executives noted slower-than-expected growth from corporate travel, which faces challenges similar to those impacting households. Government travel has also declined amid cost-cutting measures and layoffs this year.

“If uncertainty arises, the first thing that gets reduced is corporate travel,” said Conor Cunningham, a travel and transportation analyst at Melius Research. Delta CEO Ed Bastian stated on April 9 that corporate travel was trending up 10% year-on-year at the start of 2025, but that growth has since flattened. Business travel is crucial to major carriers, as these customers are often less price-sensitive and tend to book last minute when tickets are typically more expensive.

The surplus of seats in domestic skies is compelling airlines to lower prices to fill their planes. Alaska Airlines cautioned Wednesday that demand, which has not collapsed, is weaker than anticipated and will likely impact second-quarter earnings. Chief Financial Officer Shane Tackett told CNBC that while demand remains high for the industry, it has not reached the peaks expected coming out of last year.

At the front of the plane, executives assess that demand is holding up much better, particularly as U.S.-based customers continue to travel overseas in large numbers. However, lingering concerns weigh on the industry. “Certainty will restore the economy, and I believe it will happen relatively quickly,” Isom stated.