Tariff turbulence ahead: can airline stocks stay aloft?

Delta Air Lines Inc (NYSE: DAL) may have delivered a blockbuster earnings report on Thursday – but investors hoping for a smooth ascent in airline stocks should keep their seatbelts fastened.

The flagship carrier posted record quarterly revenue of $16.65 billion on $3.27 a share of earnings for its fiscal Q2 this morning, handily beating Street estimates.

US airlines stocks across the board are pushing to the upside today after Ed Bastian – the chief executive of Delta Air Lines cited “greater clarity” on trade deals as he reinstated the company’s full-year guidance.

However, clarity is not the same as certainty – and the broader airline sector remains exposed to a looming threat: tariffs.

Trump administration’s aggressive trade stance has already rattled global markets, and airlines are particularly vulnerable.

While DAL’s results suggest resilience, they don’t erase the structural risks posed by escalating import duties, especially as the August 1^st deadline for new tariffs approaches.

Trump tariffs could still hurt US airline stocks

Despite Delta’s strong showing, the tariff overhang remains a serious concern for airline stocks.

That’s because US carriers rely significantly on global supply chains for aircraft components, jet engines, and maintenance parts.

Therefore, new tariffs on imported aviation goods – some as high as 50% - could meaningfully raise operating costs for the airline industry.

In fact, Airlines for America believes these duties will actually “weaken our economic and national security and have a material and debilitating impact on domestic commercial aviation industry’s ability to grow, compete, innovate and invest.”

Plus, the timing couldn’t be worse. Summer is typically the most profitable season for airlines, but the uncertainty surrounding tariffs has already led to volatility.

Earlier this year, airline stocks plunged as much as 24% amid fears of reduced demand and higher costs. Even a temporary pause in tariff implementation offered only fleeting relief.

Analysts at Deutsche Bank have warned that the industry “will face an earnings recession in 2025” if trade tensions persist.

Tariffs-driven surge in oil prices may weigh on airline stocks

Tariffs could disrupt the aviation supply chain, leading to delays in aircraft maintenance and delivery.

The Aerospace Industries Association cautioned that sourcing new domestic suppliers could take up to a decade, potentially compromising safety and efficiency.

Investors should also note that Trump’s trade policies pose a material headwind for the US airline stocks, not just through parts and components, but also via fuel costs.

Higher import duties and disrupted global oil flows could make refineries face increased input prices – and that cascades into rising jet fuel costs.

Since fuel accounts for up to 30% of an airline’s operating expenses, any uptick can erode margins and pressure ticket pricing.

In a sector where margins are already razor-thin and reliability is paramount, such disruptions could be catastrophic.

In short, Delta’s earnings may have offered a moment of optimism, but the tariff threat is far from grounded.

With trade tensions escalating as the August deadline approaches, airline stocks remain in a holding pattern – waiting to see whether turbulence lies ahead.