The news: Q2 earnings revealed turbulence across the travel sector after American Airlines and Southwest reported lower net income and reduced their outlooks as US consumers remain cautious about booking amid economic uncertainty.

• Demand for premium cabins on long-haul international flights and spending from higher-income consumers helped American top analyst expectations for Q2 profit and revenues. The carrier said international strength was offset by weakness in domestic leisure travel.
• Southwest, which broke with longstanding company policy in Q2 and introduced checked baggage fees, reported lower quarterly profit and revenues that missed analyst estimates.

Major airlines pulled their 2025 financial outlooks in April, citing weaker domestic demand and economic uncertainty from the Trump administration’s trade policies.

• Southwest said on Thursday it now expects $600 million-$800 million in profit before interest and taxes, sharply below a prior outlook of $1.7 billion.
• American gave a broad forecast, saying 2025 could produce a per-share loss of as much as $0.20 or profit of up to $0.80 per share, below its January forecast of $1.70-$2.70. For the current quarter, it forecast a loss of $0.10-$0.60, wider than the $0.07 expected by analysts.
• Delta and United, which gave Q2 reports earlier this month, similarly expect results below their initial annual projections.

American said during its earnings call that it expected July to be the low point in domestic demand and that performance would improve with each subsequent month. Southwest also cited signs of improving demand.

Room to worry: Hotels also felt the pressure of slowing domestic demand. Hilton Worldwide and Wyndham Hotels & Resorts posted declines of 1.5% and 4%, respectively, in revenues per available room in the US. Hilton cited “softer trends” in the US and China, weaker overseas visits, and economic uncertainty.

Wyndham noted weakness in key US leisure destinations like Florida and California. "Higher-for-longer interest rates, persistent inflation, and uncertainty around immigration and trade have created an environment of ongoing economic volatility for economy and midscale guests, who remain especially sensitive to these dynamics," Wyndham President and CEO Geoff Ballotti said during the company’s earnings call on Thursday.

Looking ahead: With US airlines and hotels likely to face more headwinds amid uncertainty over tariffs and trade policy, companies need to adjust their strategies.

• Focusing on premium products and international markets can help airlines tap resilient long-haul and high-income traveler segments.
• Strengthening loyalty programs could help bolster repeat business, particularly from higher-income travelers.

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