The global airline industry is facing growing risks as trade conflicts and market volatility intensify, with weaker-than-expected demand in the U.S. airline market signaling a potential downturn. U.S. domestic air travel is down, and bookings to the U.S. have declined, contributing to concerns about the broader sector.

“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,” Rachel Gerrish, Credit Analyst of S&P Global Ratings, said. “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,” she added.

Reports of weaker domestic demand emerged in late February, with several U.S. airlines lowering their earnings expectations for Q1. February data from the International Air Transport Association shows U.S. domestic travel down 4.2% year-on-year, and North American international traffic contracted by 1.5%. This follows a strong February 2024, when the global industry benefited from a leap year.