US airlines struggle to forecast their businesses in economic fog

While Delta Air Lines and Frontier have withdrawn their full-year outlook, United has offered two different earnings forecasts

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President Donald Trump's trade war has created the biggest uncertainty for US airlines since the COVID pandemic.

With little clarity on how consumers will behave in the face of a potentially worsening economy, carriers are struggling to accurately forecast their business.

While Delta Air Lines and Frontier have withdrawn their full-year outlook, United has offered two different earnings forecasts.

"It kind of really shows a lack of conviction," said Brian Mulberry, client portfolio manager at Zacks Investment Management, which holds shares of United.

Economists polled by Reuters expect the aggressive US tariff policy to trigger a significant slowdown in the US economy this year and next, with the probability of a US recession over the coming year surging to 45%, the highest since December 2023, from 25% last month.

Since travel spending closely tracks broader economic activity, any recession is widely expected to cut airline revenue.

Carriers have traditionally relied on capacity cuts and cost management to protect their earnings in a recessionary environment. They have already started pulling those levers, but a fluid economic situation means they can ill-afford to slam the brakes hard.

The popular view in the industry is that the present uncertainty is "self-inflected" and could go away overnight if the Trump administration decided to call a truce on tariffs.