Airlines Cut Capacity and Slash Fares in 2025
Major U.S. carriers are preparing for a slowdown in domestic travel by trimming their flight schedules and offering off-peak fare sales for the second half of 2025. Southwest Airlines, Delta Air Lines and United Airlines all announced plans to curb capacity growth after warning that passenger demand has softened more than anticipated. These moves follow similar decisions by Alaska Airlines and American Airlines, each of which withdrew its full-year financial guidance amid “macroeconomic uncertainty” and volatile booking patterns.
In its first-quarter earnings report, Southwest reported a better-than-expected adjusted loss per share of 13 cents and revenue of $6.43 billion. Yet the airline said unit revenue for the April-June period is likely to be flat or decline by up to 4 percent year over year. “Given recent and short-lived booking trends, it’s difficult to forecast,” Southwest said in its filing, noting that it would not reaffirm its 2025 or 2026 EBIT forecasts. Delta and United issued comparable cautions, with Delta pulling its full-year forecast altogether and United offering dual scenarios depending on whether the economy veers into recession.
These capacity cuts are coming as consumers grapple with uncertainty around President Trump’s back-and-forth tariff announcements, inflationary pressures, and volatile markets. At American Airlines’ quarterly call, CEO Robert Isom said travelers “don’t relish uncertainty” when planning vacations with “hard-earned dollars,” echoing comments from United CEO Scott Kirby and Delta’s Ed Bastian. Bastian noted that corporate travel, which began 2025 up 10 percent year over year, has since flattened, while leisure demand is “still quite high” but off the peak levels seen through early February.
The surplus of seats in the domestic skies is translating into lower ticket prices. According to the Bureau of Labor Statistics, average airfare fell 5.3 percent in March from a year earlier, following a 4 percent drop in February. Airlines have responded with targeted fare sales during off-peak times and by reducing schedules to avoid flying empty planes. Alaska Airlines warned that weaker than expected demand will likely weigh on its second-quarter earnings, with CFO Shane Tackett explaining that fare levels have dipped since late winter drivers’ “peak that we all anticipated.”
Meanwhile, international travel continues to outpace domestic bookings, as Americans flock to overseas destinations while inbound tourism to the U.S. remains subdued. This divergence offers some relief for carriers with robust international networks, but it cannot fully offset the drop in home-market revenue. Government travel has also plunged, reflecting federal budget cuts and layoffs, further dampening overall industry performance.
Airline executives are hopeful that once policy clarity returns—whether through tariff adjustments or stabilized economic conditions—consumer confidence and ticket sales will rebound. “Certainty will restore the economy, and I think it will restore it pretty quickly,” Isom said. For now, carriers will focus on filling seats with lower fares, managing costs, and aligning capacity with the muted demand outlook.
As companies prepare for a potentially lean summer and fall, they will closely monitor booking trends and adjust their networks accordingly. Investors and travelers alike will watch upcoming capacity announcements, fare promotions, and any new guidance Airline CEOs provide when they report second-quarter results. In the meantime, those planning vacations may find more opportunities to snag discounted tickets in a market where excess capacity has replaced the roaring demand airlines predicted at the start of the year.
Related News : https://airguide.info/category/air-travel-business/airline-finance/
Sources: AirGuide Business airguide.info, bing.com, cnbc.com