Macro uncertainty, DOGE-driven federal downsizing, faltering consumer confidence, lower business bookings and impacted trans-border traffic will likely lead to a weaker Q2 and 2025 earnings outlook for the US airline industry, according to BofA Securities.

In a note Thursday, BofA said that airline stocks are down 24% year-to-date and would require macro stability before demand improves and helps reverse the market upheaval.

According to the analysts, the declining demand and pricing in Q1 signal that the industry exited March with pricing at its worst levels in several quarters.

Considering BAC aggregated credit and debit card data, BofA estimated that February spending dropped about 400 basis points month-over-month.

The analysts said they expect 2025 EPS outlook to be at risk amid deteriorating demand trends as it downgraded stock price targets for all airlines under its coverage.

BofA had a buy rating on Delta Airlines (DAL), United Airlines (UAL) and Alaska Air Group (ALK). It had a neutral rating on American Airlines (AAL) and Frontier Airlines (ULCC). Meanwhile, it had an underperform rating on Southwest Airlines (LUV), JetBlue Airways (JBLU) and Allegiant Travel Company (ALGT).

The analysts lowered their price target on Delta to $56 from $65; on United to $100 from $110; on American Airlines to $12 from $16; on Alaska Air to $70 from $80; on JetBlue to $4.25 from $5.25; on Frontier to $7 from $10, and on Allegiant to $50 from $95. They reiterated their price target of $31 for Southwest Airlines.

"[W]e believe airlines should be extremely conservative in outlooks given the uncertainty," BofA said.

Price: 39.11, Change: -4.27, Percent Change: -9.83