Diverging trends are emerging across the global airline industry given heightened geopolitical and macroeconomic uncertainties amid intensifying trade conflicts and market volatility.
(See "Credit Trends: Global Airlines Brace For Tariff Uncertainty".)
The U.S. airline market is reporting weaker-than-expected demand trends, particularly for domestic travel, compared to other regions, and we are seeing signs that inbound air travel bookings to the U.S. are down overall.
"We think downside risks have materially increased for the wider sector as softer global economic growth could weigh on consumer confidence and cut down demand for air travel," said S&P Global Ratings credit analyst Rachel Gerrish.
"Most of our rated issuers have built up a ratings buffer to withstand some pressure on earnings and cash flow this year, but we cannot rule out potential negative rating actions for airlines with tighter headroom," Ms. Gerrish added.
It's early days, but demand for air travel to, from, and within the U.S. appears weaker. Reports of U.S. domestic demand being down started to emerge in late February, with several U.S. airlines lowering their earnings expectations for the first quarter.
The latest data from the International Air Transport Association show U.S. domestic travel declining 4.2% year-on-year in February, while North American international traffic contracted by 1.5%.
We note that February 2024 was exceptionally strong for the global airline industry and a leap year, with the extra day meaning a strong comparison month. However, airline industry trends in early 2025 show a clear divergence, geographically, with U.S. market trends weaker than elsewhere.
This report does not constitute a rating action.
