United airplanes are seen at the Newark Liberty International Airport in Newark, Unitted States on July 16, 2024.
Jakub Porzycki | Nurphoto | Getty Images
NYSE Arca Airline Index versus the S&P 500
Airlines, especially full-service carriers with big international networks, had been a bright spot thanks to strong demand and moderating domestic flight growth, but some analysts are now anticipating potential demand impacts, particularly for more price-sensitive customers ahead of the crucial spring travel season.
U.S. consumer spending fell in January for the first time in almost two years, the U.S. Commerce Department said last week. Earlier in February, its retail sales report from a month earlier showed a bigger-than-expected drop.
“While we continue to remain constructive on the supply backdrop – which we still believe is favorable – our attention has shifted to what appears to be an emerging economic ‘soft patch,'” Deutsche Bank said in a note on Tuesday. “To what extent and duration are not clear at the present, however, we do think it will likely weigh on demand for air travel, particularly the domestic discretionary segment.”
The bank said it has not seen any signs of weakness in corporate or long-haul international travel.
“Business is really robust,” United Airlines CFO Mike Leskinen said at a Barclays industry conference last month. “International leisure is very strong. Domestic leisure is kind of okay. It’s fine. It’s what we expected.”
