Airfares fall 7% in May amid Trump tariff uncertainty, weak travel demand

US travelers got some relief this spring when it came to prices for air travel.

The latest Consumer Price Index report showed fares were down a whopping 7.3% last month from a year ago, following a 7.9% decline in April.

The data’s release comes amid uncertainty over how President Trump’s tariff policy might affect consumer demand and the economy at large.

Earlier this year, Delta (DAL) and American Airlines (AAL) pulled their full-year outlooks for revenue and EPS, citing tariff-related headwinds and weak demand in the domestic main cabin, where cost-conscious travelers have pulled back.

United (UAL) took the unusual step of offering two potential outlooks, while Southwest Airlines (LUV) pointed to “economic uncertainty” as the reason it did not reiterate its 2025 or 2026 guidance.

“We were highly impacted on the demand side by the tariffs and the consumer confidence erosion,” Southwest Airlines CEO Bob Jordan told Yahoo Finance in April. “We need that uncertainty to go away.”

Meanwhile, the International Air Transport Association (IATA) in its recent 2025 outlook report said it expects air passenger traffic growth will slow to 5.8% year over year in 2025, down from 10.6% in 2024. The group cited ongoing challenges, including US trade policy and a cooling global economy.

Travel executives also point to shifting trends amid the ongoing trade tensions — most notably, a decline in foreign visitors to the US.

Last month, Expedia (EXPE) cut its full-year bookings and revenue outlook, citing weakness in both domestic and inbound US travel.

“Europeans are traveling less to the US, but more to Latin America,” said Expedia CEO Ariane Gorin during the company’s earnings call in May.

In response, airlines have scaled back their transborder flights between Canada and the US.

Air carriers have also separately been adding premium capacity to flights to increase revenue from higher-income travelers.

“Five years ago, they [airlines] wouldn’t dream of putting more premium seats on an airplane. Today, they can do it. They’re allowed to do it because the demand in the main cabin is less than it used to be,” aviation consultant Mike Boyd, president of Boyd Group International, told Yahoo Finance.

Boyd believes domestic budget airlines, which are already under pressure, will take the greater hit from decreased demand and falling prices.

Overall, airline stocks are down year to date despite a recovery from their April lows following the rollback of President Trump’s broad-based “reciprocal” tariff policy.