By Katherine Hamilton

Airline stocks took a steeper nose dive in March as investors worry the companies aren't reacting fast enough to falling consumer confidence, analysts say.

Some carriers have started cutting prices and available seating to mitigate falling demand. But many are holding off on making major cuts in hopes that uncertainty will subside ahead of the peak summer season.

"I went into this year expecting it to be a blue sky year for airlines," TD Cowen analyst Tom Fitzgerald said. "Now it's just kind of clouds everywhere and it's unclear when they're going to dissipate."

Shares of Delta Air Lines have slipped 23% in the past month, trading at $41.83 on Tuesday. American Airlines has fallen 24% to $10.14 and United Airlines is down 23% to $66.62. Lower cost carrier JetBlue Airways has declined 22% to $4.73.

Consumer confidence hit a four-year low in March, but a drawback in corporate travel is what's really hurting airlines, analysts said. Amid uncertainty about tariffs and border policies, automotive and defense companies in particular are cutting back on business trips, which are usually booked more closely to the time of travel. Government travel, which makes up around 2% of revenue for many airlines, is down 50%, Melius Research analyst Conor Cunningham said.

As a favorite for corporate travel, Delta has an especially big challenge to overcome, analysts said. The airline in March trimmed first-quarter revenue growth guidance to 3% to 4%, down from 7% to 9%. Delta Chief Executive Ed Bastian said during a conference it has tinkered with pricing to attract more travelers, but isn't reducing its capacity just yet as it heads into the peak summer season.

"They don't want to overreact and pull too much supply out of the market, and then things get back on track faster than they expect, and they miss out on the peak season," Fitzgerald said.

American Airlines is using a smaller plane with fewer seats in the Washington, D.C., market and Air Canada has pulled some supply from the U.S.-Canada crossborder market, Fitzgerald said. United retired 21 aircraft that needed engine overhauls, but is waiting to significantly reduce supply until late summer at the earliest, Chief Executive Scott Kirby said.

"Hope springs eternal and it is the summer peak," Kirby said during a March conference. "But by the time we get to August … every analyst is going to be writing about the capacity cuts and the supply changes."

Kirby said United is trying to scoop up more leisure travelers to make up for lost government customers. That's likely a playbook Delta and other corporate-heavy airlines will use, Raymond James analyst Savanthi Syth said. Even though consumer confidence is low, Syth believes Americans will still travel, but may take fewer trips or try to limit how much they spend.

If corporate demand continues to be slow, higher end airlines like Delta will likely try to attract more leisure travelers by lowering prices and opening up booking for further-out dates, Cunningham said. That would push down ticket prices industry-wide and take customers away from low-cost carriers like Frontier or JetBlue, he said.

"This whole industry works when everyone's in their own lane," Cunningham said. "It's a net negative for the overall industry when something like that is happening."

Write to Katherine Hamilton at katherine.hamilton@wsj.com

(END) Dow Jones Newswires

April 01, 2025 14:37 ET (18:37 GMT)

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