Trump's trade war threatens record-breaking summer for airlines

BarcelonaThe business world is full of anglicisms, acronyms, and names that seem straight out of a superhero comic. If the Big Four are the four largest global consulting firms, in the United States the Big Three are made up of the trio of the country's main commercial airlines: American Airlines, Delta Air Lines, and United Airlines. At the end of last year, this group of airlines was rubbing their hands together in anticipation of a year of greater tourism boom and record travel across the Atlantic. However, the trade war driven by Donald Trump has also put their business at risk, and the markets are already showing uncertainty surrounding the sector's immediate future, with falls in share values and more moderate-than-expected growth forecasts.

Since January, Delta Air Lines shares have fallen around 40%, and in its latest earnings presentation, the company anticipated a reduction in the capacity growth expected for the second half of the year, leaving it stable compared to the previous year. Its CEO, Ed Bastian, defined this beginning of 2025 as "a parade of catastrophes", since the economic uncertainty was compounded by the impact on demand of disasters such as the Los Angeles fires or the latest plane crashesIn addition, Delta has decided to withdraw its full-year forecasts and will wait for the geopolitical context to become clearer before issuing new ones.

The stock market crash has been even worse for American Airlines, which has plunged nearly 50% since the beginning of January. For now, the company has avoided updating its outlook, but next week it will have to explain itself to its investors during its earnings presentation. The third leg of this trident, United Airlines, has fallen nearly 35% on Wall Street in the same period as its competitors. The airline boasted this week of its best first-quarter results in the last five years, "despite a challenging macroeconomic environment." Even so, it took the unusual step of offering two possible scenarios for its 2025 earnings, and warned that a recession would dent its profits. This summer, airlines will also reduce flights to offset the drop in demand for travel within the U.S.

The announcement of the tariffs imposed by Donald Trump—now partially paused for 90 days, with the exception of China—comes just as airlines face the arrival of summer, the most lucrative season of the year for the sector. The latest data published by the U.S. National Tourism Office show how foreign tourist visits fell 11.6% in March compared to the previous year. The forecasting firm Tourism Economics, which previously anticipated that the number of international travelers would grow 9% in this market this year, now estimates a drop of 9.4%. "Trump's policies and statements have generated negative sentiment toward the United States among international travelers," notes the consulting firm, which predicts that the arrival of Canadians will decrease by 20%.

The cost of selling and manufacturing airplanes

The consequences of the trade war for the airline industry are dangerous, both in terms of demand—since travel is not an essential expense for households and would be among the first to decline in a recession—and in terms of the cost of marketing and manufacturing new aircraft. China has ordered its airlines Ryanair CEO Michael O'Leary warned this week that they will not accept any more deliveries from the American manufacturer Boeing, in response to the imposition by the US of tariffs that could reach up to 245% on some products from the Asian country. in an interview in Financial Times that the low-cost airline should delay deliveries of Boeing aircraft if they become more expensive due to the trade war. The company was supposed to receive 25 planes from the US manufacturer starting in August, but the executive explained that they don't really need them "until around March or April of 2026."

Beyond the general 10% tariffs for all countries, the sector will also have to suffer from the additional 25% for steel and aluminum, two essential materials for producing airplanes. The European manufacturer Airbus has an assembly plant in Alabama, but would face more obstacles importing parts that are produced in other parts of the world. "Obviously, there would be an increase in cost and most likely in price for the airlines, so that would be passed on to consumers," said its CEO, Guillaume Faury, in February. Incidentally, Boeing, Delta Air Lines, and United Airlines each donated $1 million to President Donald Trump's inauguration ceremony.

What many travelers are wondering, however, is how all this will affect ticket prices. The industry doesn't have a unanimous assessment of how the tariffs would be passed on to the end customer. For now, Air France-KLM has already announced that it is cutting economy class fares to fill its transatlantic flights, because it has noticed a drop in demand. "This is new and uncharted territory for us, but we're used to crises," said CEO Ben Smith in an interview on Bloomberg TV. At El Prat Airport, Level—the low cost long-haul airline of the IAG holding company—continues with its plans to fly to the United States, where it currently operates five routes.