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Key Takeaways

• Airlines have been struggling due to low domestic and international travel demand and low consumer confidence.
• The lower demand is due to a potential slowdown in the economy that was triggered by Trump's tariffs.
• However, investors shouldn't completely write off top-ranked airline ETF JETS from their holdings.

The airline industry is facing growing turbulence as the ongoing global trade war creates a cloud of uncertainty over passenger demand and revenue projections. This week, Southwest Airlines (LUV - Free Report), American Airlines (AAL - Free Report), and Alaska Air Group (ALK - Free Report) withdrew their full-year 2025 guidance, citing macroeconomic uncertainty and demand softness, signaling rougher skies ahead for investors.

Amid the gloom, the U.S. Global Jets ETF (JETS - Free Report), which tracks major airline stocks, has moved down around 2.3% over the past week and 27.4% since the start of the year.

What Happened?

All three airlines pointed to a slowdown in domestic leisure travel, which is historically one of the sector’s most stable pillars. Southwest Airlines stated that bookings weakened throughout the first quarter. Alaska projected a 6-point hit to second-quarter revenues due to reduced demand. Meanwhile, American Airlines gave a modest second-quarter earnings forecast of 50 cents-$1.00, significantly below consensus estimates.

Delta Air Lines (DAL - Free Report) and United Airlines (UAL - Free Report) also signaled caution. Delta dropped its forecast earlier in April and United Airlines went a step further by offering two distinct profit scenarios — one assuming continued stability, and another preparing for potential recessionary conditions.

Delta Air Lines CEO Ed Bastian said the company would not expand flying in the second half of the year due to disappointing bookings amid Trump’s unpredictable trade policies, citing weaker-than-expected corporate and leisure travel demand.

JETS ETF in Focus

U.S. Global Jets ETF provides exposure to the global airline industry, including airline operators and manufacturers from all over the world, by tracking the U.S. Global Jets Index. The product holds 56 securities, with the highest concentration on the top four largest U.S. carriers, which account for nearly 10% share each. American firms account for 76% of the assets, followed by Canada, Singapore, and Spain. 

U.S. Global Jets ETF has gathered $716.3 million in its asset base while seeing a heavy trading volume of nearly 3 million shares a day. It charges investors 60 bps in annual fees.

Travel Demand Falling

Airlines are facing twin attacks from falling domestic and international travel due to a potential slowdown in the economy triggered by the Trump administration's aggressive and unpredictable tariff policy. 

International arrivals to the United States have declined sharply this year, with the biggest drops reported among western European, Central American, and Caribbean travelers. Per the latest report, the total number of global visitors by air, sea, and land declined 3.3% year-over-year in 2025.

March was particularly negative, with an 11.6% drop compared to the same month last year. Stricter immigration controls and new trade policies introduced by the Trump administration may be deterring potential tourists, according to Stefan Gössling, a professor at the School of Business and Economics at Linnaeus University in Sweden.

The travel forecasting company Tourism Economics, which, in December, anticipated that the United States would have nearly 9% more international arrivals this year, recently revised its annual outlook to predict a 9.4% decline.

What Lies Ahead?

While business travel and premium international bookings remain resilient, the core of the industry — the domestic economy class — will remain under pressure. The near-term outlook suggests that airline stocks will likely remain subdued until greater clarity emerges on trade negotiations and consumer sentiment stabilizes.

However, investors shouldn’t completely write off the airline ETF JETS from their holdings. This is because it has exposure to a number of firms, suggesting that the space can easily counter shocks from some of the industry’s biggest components. Further, JETS has a solid Zacks ETF Rank #1 (Strong Buy) rating.

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