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American Airlines in Freefall: Tariffs and Demand Slump Force Profit Forecast Retreat

Updated: April 24, 2025 16:52

Image Source: Reuters
American Airlines took out its 2025 profit target, following a surge of big U.S. airlines rushing to adjust amid record uncertainty set in motion by President Donald Trump's belligerent new tariffs. The action follows as the airline sector experiences the most difficult operating environment since the pandemic, with demand lagging and expenses climbing dramatically.
 
Key Highlights:
  • Profit Forecast Withdrawn: American Airlines, together with Delta, United, Southwest, and Alaska Air, withdrew its 2025 profit forecast, attributing the action to the volatile effect of Trump's tariffs and a steep decline in travel demand.
  • Tariffs Spur Uncertainty: The tariffs—125% on Chinese imports—imposed have shaken the industry, with concerns over an earnings recession in 2025. The airline stocks have fallen sharply, with American Airlines shares down by 42% since the beginning of the year.
  • Demand Deterioration: Business and leisure travel bookings have both fallen, particularly in premium cabins, as corporations and consumers reduce discretionary expenditures. International demand, too, has softened from Canada and Europe as costs have increased and economic uncertainty has grown.
  • Cost Pressures: Carriers are confronting increasing costs, such as more expensive parts for aircraft and raw materials such as aluminum and steel, further compressing margins.
  • Industry-Wide Impact: The aviation industry, frequently a bellwether for the overall economy, is facing record volatility. Analysts caution that the trifecta of tariffs, inflation, and weakening global growth may keep demand muted well into 2025.
Sources: Business Insider, CNBC, Israel Hayom, CAPA - Centre for Aviation

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