Jet Blue Airways reported yesterday that it is reducing flights and parking aircraft as “soft travel demand” is impacting the airline’s revenue.
In its coverage of the announcement, USA Today notes that falling demand is not only impacting Jet Blue:
[M]ajor U.S. airlines are scaling back capacity ahead of the typically busy summer travel season as they look to protect fares and adapt to weaker demand.
“While most airlines are feeling the impact, it’s especially frustrating for us, as we had hoped to reach break-even operating margin this year, which now seems unlikely,” JetBlue’s Geraghty said.
The company had withdrawn its 2025 forecast in April citing a weakening demand environment.
Media coverage often puts blame on the “uncertainty” fostered by President Trump’s haphazard tariff policy—i.e., tax-increases—which have made it very difficult for firms to forecast economic trends.
But tariffs are just part of a larger economic context in which wages are not keeping up with price inflation and overall economic activity is slowing.
Indeed, this new announcement from Jet Blue is just the latest in several months of warnings to the industry overall.
As the AP reported last month, Expedia Group warned that travel demand was weakening:
Expedia Group said Friday that reduced travel demand in the United States led to its weaker-than-expected revenue in the first quarter, and Bank of America said credit card transactions showed spending on flights and lodging kept falling last month.
The two reports add to growing indications that the U.S. travel and tourism industry may see its first slowdown since the end of the COVID-19 pandemic fueled a period of “revenge travel” that turned into sustained interest in getting away. … In April, Americans’ confidence in the economy slumped for a fifth straight month to the lowest level since the onset of the pandemic.
It may be we’re now finally seeing this weakness in demand showing up in the aggregate passenger numbers put out by the US Department of Transportation.
Unfortunately, the most recent data on this is from March, but even as early as February, we saw the first negative year-over-year change in total “passenger enplanements” since the covid lockdown. Moreover, in February and March, passenger traffic was down, year over year, two months in a row. Outside of the covid lockdowns passenger traffic, this has not happened since the summer of 2013.
As we can see in the graph, year-over-year drops in passenger traffic is well correlated with changes in the employment level. In July and August 2013, for example—the last non-covid time air passenger travel went negative for two months in a row, employment growth in October and November that year was unusually weak, nearly dropping to zero. In 2008, a clear downward turn in air traffic, which began in April of that year, was followed by an even long period of negative growth in employment, which began two months later.
Will this year’s fall in air traffic prove to be a similar warning about weakness in the overall employment and economic trend? If it is, the official employment data has yet to show it. Although employment data has tended to weaken since late 2022, it was still positive during April and May of this year.