Economic turbulence shakes US airlines as travel demand falters

«Your first needs are food and shelter. And then, we're a little bit down the list of expenditures,» said David Neeleman, CEO of low-cost carrier Breeze Airways, in an interview. «If you don't have a job, you're not going to go buy an airline ticket.»

With demand slowing, airlines have started culling flights to avoid lowering fares and to protect margins. Frontier, Delta, United, American Airlines, JetBlue and Allegiant all trimmed their April-June quarter capacity in the past two weeks.

United CEO Scott Kirby has warned of a large drop in industry-wide capacity by the second half of August if demand does not rebound. To be sure, bookings for premium and long-haul travel are holding up. United reported an 8% year-on-year jump in spring international bookings. Some of the demand slowdown is also due to recent safety incidents. Amanda Demanda Law Group data shows airplane safety concerns reached an all-time high in February, with Google searches for «Are planes safe now?» up 900%.

Airlines expect the hit from safety incidents to fade soon. But they are less sure about economic pressures.

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WARNING SIGNS U.S. consumer confidence plunged to the lowest level in more than four years in March, with future expectations for income, business, and labor market conditions hitting a 12-year low, a Conference Board survey showed on Tuesday.

Air tickets sold through U.S. travel agencies fell 8% month-on-month in February after a 39% jump in January. Both corporate and leisure trips were down, Airlines Reporting Corp data showed last week.

Annual growth in passenger traffic slowed to 0.7% in March from 5% in January, according to U.S. Transportation Security Administration data.

Weakening demand is hurting the