This week, Moody’s became the second major ratings agency to issue a warning on waning demand for travel, changing its outlook for the U.S. airport sector from stable to negative.
Earlier this week, Fitch Ratings warned that U.S. airlines are facing a period of softer demand as consumers pull back on discretionary spending.
Moody’s said weaker-than-expected economic growth is expected to contribute to a modest decline in enplanements in 2025. “The ripple effects from tariffs and trade tensions will curtail leisure and business travel,” the ratings agency said. “Higher prices on U.S. consumers and businesses — we predict U.S. inflation will reach 3.2% this year, up from our 2.5% prediction in February — along with reduced consumer confidence and business uncertainty will lead to reduced spending, hiring and investments that will impact travel. At the same time, individuals at the high end of the income and wealth scales, who are less susceptible to dwindling savings and slowdowns in hiring, tend to maintain travel plans despite economic swings. That said, significant recent reductions in the value of investments have the potential to cause well-heeled travelers to reevaluate plans.”
Airports with a high level of budget-conscious travelers or serving as major U.S. entry points are most at risk from an enplanement slowdown, Moody’s said, noting that airlines are reducing growth in available seats by more than they anticipated at the start of the year.
“We expect domestic travel to slow given the reduction in airline service by legacy carriers and low and ultralow cost carriers,” Moody’s said. “Airlines have indicated that premium seating and international routes are faring better than domestic travel in economy cabins. Nevertheless, fewer visitors to the U.S. from key Canadian and Western European markets in reaction to tariff and immigration policies have the potential to dim international travel levels. And the number of visitors with tourism visas has declined. Positively, business travel from overseas to the U.S. has remained largely unaffected by trade tensions and other factors.”
One additional positive factor noted by Moody’s is that airports’ financial strength “remains near an all-time high, providing a buffer to withstand a difficult 2025.”
