Airlines operating international routes to and from the US look set to have a horrible summer with many tourists going elsewhere. This follows a wave of bad publicity surrounding US immigration policies implemented by the Trump administration.
The bad press is having a knock on effect on the airline sector, which is having to offer discount packages to overseas visitors in an effort to sustain the summer tourism traffic to the United States. The discounts presage a nightmare scenario that could turn into some potentially horrendous numbers for US airlines towards the end of 2025.
According to industry analysts, airlines are already in defensive mode, cutting some routes into the US and also retiring older aircraft from their fleets. United Airlines has cancelled its plans to run a 737 route between LAX and Toronto from May due to lack of demand. Key routes between Europe and the US, as well as trans Pacific routes from Australia are also showing a decline in demand.
Tickets are already being increasingly discounted with one airline offering a return flight between Sydney and Los Angeles from less than USD 400. The Armchair Trader has seen British Airways offering transatlantic flight deals for less than £500. This has included hotels as part of the package in some cases. It smacks of increasing desperation to get tourists to book holidays in the US in the next few months.
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United Airlines stock in free fall
Shares in United Airlines NASDAQ:UAL are starting to reflect these concerns. Stock in the US airline has sold down over 25% in the last month alone.
United Airlines is, however, not the only airline which is exposed to the problem of a horrendous summer for US tourism. Also in the firing line is American Airlines NASDAQ:AAL while Alaska Air Group NYSE:ALK is even more heavily exposed to a decline in travel from Canada, serving as it does six Canadian cities including a non-stop service between Seattle and Toronto.
Much of the selling to date seems to have been driven by a boycott by the many Canadians refusing to travel to the US for leisure purposes. This could feed through into a big drop in leisure travel from Europe and the Asia Pacific region in the summer.
Delta Airlines stock drops 27%
Shares in Delta Airlines NYSE:DEL are also down, this time over 27% in the last month. Delta Airlines stock has cratered from $70 in early February, to trade at $43 on Monday. March has been a horrendous month for the airline’s shareholders. Alaska Air Group has seen its stock fall over 30% in a month, this despite Zacks Equity Research calling it “a top momentum stock for the long term” only last month.
Non-US airlines are being less heavily affected as they have other markets and lucrative routes which do not touch the US. Shares in IAG Group LON:IAG, which owns British Airways, have however dropped from 366p to 258p over the course of February and March, but are still up 25% for the last six months. The IAG share price is starting to make the stock look heavily oversold. However much of the selling is being driven by worries about how British Airways will cope with a downturn in transAtlantic traffic this summer.
British Airways has also been suffering from a crackdown by the Competititon and Markets Authority on the Atlantic Joint Business Agreement shared by five carriers, including British Airways.
