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Several airlines, such as American Airlines (AAL), Southwest Airlines (LUV), and Delta Air Lines (DAL), are withdrawing their full-year guidance as booking trends remain uncertain and economic pressures grow.
Citi managing director Stephen Trent joins Morning Brief to discuss how airlines should be navigating tariff-fueled economic uncertainty.
To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
If negotiations were to hit as early as tomorrow here, does American Airlines come out with new guidance and how do you rate the decision to pull forward guidance at the moment?
Yes, good morning and thank you for having me. Um I think if negotiations were to occur tomorrow, um I'm not so sure it would be as simple as uh flipping a switch. I do think though, uh that uh at least sometime forward that the airline would be able to uh get back to offering some full year guidance. Uh because some of these uh bookings occur a lack of course. So, uh maybe you would need at least a couple of weeks of evidence to see that uh booking trends are stabilizing.
You know, Steve, I think you point out something really key in that it's it's going to take a lot to kind of turn or reroute the plane once it's in the sky because you're thinking about kind of a few things here. Number one, it's the capacity side that pretty much every major airline has said we're going to kind of pull back some of the acceleration of our own capacity growth and also at the same time that means that we're going to rely on natural attrition and perhaps not hire as aggressively for that capacity. Plus on the aircraft side, they're all sounds like not willing to take delivery of any aircraft if that means that there's going to be a tariff that's also going to be slapped on it as well. So how many quarters could this be in what these airlines are talking about right now, how many quarters could it have a lingering impact as well?
Yeah, great question. And look, I think the tariffs, uh the economic uncertainty that we're going through today, unfortunately was certainly not anticipated a couple of months ago. Um American, Delta and others have strongly telegraphed uh that they're not going to pay tariffs on these planes. Um so in terms of how long it lasts, it's really hard to to tell, you know, putting on sort of my my top down economics hat. Um, you know, what self-help can the airlines deliver over that period? One easy place of self-help uh is to manage capacity. Uh and what you could see for example, um if the uh economic rebound is a little slower than expected, there's wiggle room to retire aircraft. There's wiggle room to um reduce off-peak flying, uh attrition, hiring freezes and this kind of thing. Um looking at the space overall, I would still say the network carriers because of premium cabin international long haul and co-branded credit card look much better positioned uh than the discount airlines.
