Warning signs from the travel space are flashing a recession is coming, here are those points and a reason it may not be entirely bad.
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American, Delta, And United All Revise Down
American Airlines indicated on a recent earnings call that it would revise its first quarter to be even worse than expected. Already projecting a loss, the airline has doubled to tripled its first quarter losses.
“American Airlines on Tuesday forecast a bigger first-quarter loss, amid concerns that tariff pressures and government spending uncertainties could dampen travel demand.
The airline now expects adjusted loss per share in the range of about 60 cents to 80 cents, compared with its previous forecast for a loss of about 20 cents to 40 cents.” – Reuters
“The revised outlook called for sales growth of 3%-4% (vs previous expectations of 7%-9%) and an operating margin of 4%-5% (vs. previous expectations of 6%-8%). Similarly, EPS was revised to $0.3-$0.5 (vs earlier expectations of $0.7 – $1.0).” – Yahoo! Finance
“We have also seen weakness in the demand market,” Kirby said. Government travel is about 2% of United’s business, but other workers’ travel is also affected, like consultants and contractors, which account for another 2% to 3%.” – CNBC
Americans Planning Vacations Down 20% From 2024
Fortune cited a report from The Conference Board that showed a sharp drop in Americans planning to take a vacation in the next six months.
“In February, the number of Americans planning a vacation in the next six months was the lowest in 15 years, excluding the pandemic when travel was pretty much obsolete, according to a survey conducted by the Conference Board. Apollo chief economist Torsten Slok points to uncertainty as the underlying rationale.” – Fortune
Last year at the same time, 49.7% of Americans planned to take a vacation in the next six months, but that’s down to 39.7%. The last time it was this low corresponded to the latter months of the credit crunch, or the 2008 housing crisis – about 20% lower than last year.
It’s important to note that while this is not business or government travel, those that work in the government or businesses that serve the government may not feel confident about their jobs and thus are not planning to take a vacation until the future becomes clearer. It’s unknown how much (if any) of this is related to such sentiment and how much of this is simply a souring outlook generally.
Benefits Of A Recession
While no one wants to talk about a recession, I stated here on Live And Lets Fly more than a year ago that the economy was defying all logic and business sense. It could be that compounding inflation, though it’s nearly stopped entirely at this point (core inflation was up just 0.2% from the prior month), that has finally caught up to the economy. It could be the concern of the future economy, the affect tariffs, trade restrictions, and travel bans could be causing concern. It could be something else entirely.
A recession, especially for an economy that
News flash we’ve been in a recession for about 2 years now and the U6 unemployment numbers not the U3 that the press likes to focus on have shown that. Just look back to see when that 2 consecutive quarters of negative happened that the press tried to bury. My business has been down 2 years in a row. Your article cut off so I couldn’t finish it but I’m assuming it reads that it will beneficial for those that have a ton of miles that can finally be used to redeem for premium international flights. Which will be great because I have wondered why all these people have so many miles to burn on international premium class travel that the airlines are putting in premium heavy configurations.
Yep . Business layoffs have been published for over a year now . A coming recession has been in the cards for at least that long .
U6 is rising but it’s still low compared to the average for the last 30 years. It was also historically low about 2-2.5 years ago. Logically, it only ever was going to rise from there
Solid conclusion
Trumpcession!
Sure is! I just read another article about Canadians canceling travel to the US because of Trump’s rhetoric. Not helping the travel business in any way, and certainly not doing any good with our relations with some of our best friends.
I was just about to say the same. Myrtle beach just had the Can- Am festival. Many Canadians cancelled (30%) a small vignette, but a look into the crystal ball of what might be seen. We can’t afford this nonsense.
I think post covid “revenge travel” lasted 1.5-2 years longer than it should have. Count me in as one of those scaling back travel plans in the next year or two, but for other reasons: Getting off the status wheel because of ever-increasing status requirements and at the same time devaluations of status across the board. And maybe it’s not affecting me (yet) but my company has been continuing to “right-size” for the past 2.5 years, which means colleagues losing jobs (even the good ones). So I do think recession has been happening for a while now.
And screw your autoplay video ads. (Not to you specifically, Kyle). I will never book a Vrbo just for that stupid-ass MySpace style autoplay ad. It fvcking autoplays every 10 seconds even if I pause it.
Agree there was a fad aspect to big leisure travel from 2021-2024. Instagram social pressure / attraction plus more flexibility to be away from the office and lots of points liquidity on top of money liquidity. Still a long term trend, but probably spiked above trend those years.
Plenty of people have been talking about recession chances being imminent since the beginning of the recovery from the 2008 crisis. Some periods louder or quieter than others.
Data is softer but for example in Delta’s case it was a revision to lower growth vs an outright swing to yoy declines in sales.
Higher probability of a recession than a few months ago, and certainly not an outcome to dismiss, but not a given.