Airlines Cut Fares as Tariffs, Uncertainty Lower Travel Demand

Airlines are cutting ticket prices as demand weakens amid growing economic uncertainty, partly fueled by concerns over tariffs. Travel is falling lower on consumers’ priority lists, while companies are scaling back corporate travel as part of broader cost-saving measures.

Business travel, once a major revenue driver for airlines, is no longer providing the same level of support. As a result, airplanes are flying with more empty seats, prompting carriers to reduce fares. According to the Bureau of Labor Statistics, airfare in March dropped 5.3% compared to the same period last year.

Shane Tackett, CFO, Alaska Airlines, told CNBC the airline does not expect second-quarter 2025 earnings to match the strength of 4Q24 or 1Q25. “Demand is still quite high for the industry, but it’s just not at the peak that we all anticipated might continue coming out of last year,” he said.

Domestic travel has slowed, and growth in corporate bookings has flattened. Delta CEO Ed Bastian noted that while corporate travel had been growing at a 10% year-over-year rate, that momentum has stalled. Business travelers remain a crucial segment for airlines, as they tend to book last minute and are less price-sensitive, CNBC reports.

Delta Air Lines, Southwest Airlines, and United Airlines have all announced plans to reduce capacity growth. Several airline executives have also withdrawn forecasts, citing the difficulty of predicting market conditions in the current economic environment.