US president Donald Trump’s “Liberation Day” was anything but liberating for the travel industry and at least one expert is predicting serious air fare hikes as carriers pass on rising costs to consumers.
Stock prices for the three major US airlines which were already down 24% from 2024, plunged an additional 10 to 15% as analysts tweaked to the impact tariffs will have on airplane part costs and on consumer demand.
Gad Allon, a professor of operations, information and decisions at the University of Pennsylvania’s Wharton School, told Forbes that airlines will see a 5% to 10% increase in costs in the short term simply to maintain their existing planes.
Duncan Bureau, former president of Air Canada Rouge and former vice president global sales for Air Canada, said airlines will pass on tariff-related cost increases to consumers.
“Consumers should expect to see an increase in the cost of travel due to any cost increases that airlines are exposed to,” he told Open Jaw.
Airports also could see cost increases for everything from parts to ground-handling equipment.
“From aircraft manufacturers, ground handlers, maintenance, or service providers, there is no business attached to the airline sector that will not be impacted,” Bureau said. “Everything will go up and all of these cost increases will be passed onto the consumer.”
Cruise stocks also took a beating on 03APR.
Skift reports cruise and tour company stocks dropped 10.4% the day after Trump’s grand tariff announcement on the White House lawn, complete with a now-famous chart of which countries were being slammed the hardest.
Cruise Industry News says Norwegian Cruise Line Holdings stock fell 16.4% on the day, while Carnival was down 13.7% and Royal Caribbean down 11.2%.
Citing the U.S. recession risk and a general global slowdown, Skift Research is lowering its outlook for global travel.
“We now forecast 2% to 5% travel industry growth in 2025, down from our forecast at the start of the year for 6% to 9% growth.”
Tariffs also could increase costs for hotels, airlines and cruise ships, according to Travel Weekly. Elevate, the government affairs agency for the US Tour Operators Association, said higher product prices caused by tariffs have the potential to decrease consumers' purchasing power, making discretionary purchases like travel less affordable.
The Yale Budget Lab reports that tariffs would cost the average American household an additional $2,700 to $3,400. The numbers are slightly less for Canadians, but still notable. The upshot will almost certainly mean belt tightening and experts say that will translate to lower travel spending.
“Trump has launched a trade world war that goes much beyond the US-Canada relationship,” said Frederic Dimanche, Professor/Director at the Ted Rogers School of Hospitality and Tourism Management at Toronto Metropolitan University.
“This international trade war will have ripple effects on the hospitality and tourism sector, from increased costs of doing business to durable impacts on consumers' discretionary income,” he said in a note to Open Jaw.
“I went into this year expecting it to be a blue sky year for airlines,” TD Cowen analyst Tom Fitzgerald told the Wall Street Journal this week. “Now it’s just kind of clouds everywhere and it’s unclear when they’re going to dissipate.”
Bank of America summed up the uncertain economic climate nicely this week. In a note to investors, the bank put it this way: “We do not envy management trying to guide in this unknown environment.”
