When U.S. airlines enter down cycles, as has happened over the past couple of months, it's typically a recipe that favors discounters.
Take, for example, the Great Recession. In 2008, Delta, United and American cumulatively recorded net losses of more than $16 billion.
US Airways, Continental and Northwest -- the other legacy U.S. airlines operating at that time -- also took big hits.
But even amid depressed demand and fuel prices that then-US Airways CEO Doug Parker described as "staggeringly high," low-cost operator Southwest managed to bring in an operating profit of nearly $500 million and net income of close to $200 million. A second U.S. airline winner that year was ultralow-cost carrier Allegiant, with net income of $35.4 million.
Low-cost structures and a focus on economy flyers are primary elements that buoy such airlines when consumers get more frugal and businesses cut back on travel. But now, with U.S. airlines managing through significant drops in domestic demand amid warnings of a potential recession, industry analysts say that this time around, the tables could turn.
Full-service carriers, with their array of premium seat offerings, lucrative loyalty programs and stronger balance sheets, could be positioned to navigate this downturn better than their already weakened discount competitors.
"In prior airline downturns, consumers traded down from legacy carriers to low-cost carriers," wrote TD Cowen investment analyst Tom Fitzgerald in one early April advisory. "Given the evolution by legacy carriers in cabin segmentation and how they merchandise their products, we don't expect history to completely repeat itself. While we do expect some consumers to trade down, we believe there is greater likelihood that consumers trade down within the same carrier's cabin than they pivot to a low-cost carrier."
Supporting his take on the positioning of legacy carriers is the resilience so far of the premium market and long-haul travel relative to domestic economy travel. Both favor United, Delta and American, which all offer an array of premium seat options and sizeable international networks.
Delta, United and American all said about their first-quarter earnings that demand for premium products has thus far held up. So, overall, has international demand, especially to Europe and Asia, buoyed in Europe's case by robust outbound demand despite a decline in flying from Europe to the U.S.
Meanwhile, tanking domestic demand drove the Consumer Price Index for airfares down 9% between January and March. And Delta expects main cabin revenue to be down around 10% this quarter year over year, according to JP Morgan investment analyst Jamie Baker, who deduced the number from less specific forecasts Delta provided on April 9.
If the domestic economy segment of the market continues to be the hardest hit, airlines such as Southwest, Frontier and Spirit, which focus heavily on that segment, will be hit especially hard, Baker wrote.
That was evident in Southwest's Q1 results, reported in late April, when the carrier said domestic leisure demand had weakened and that it would reduce capacity in the third and fourth quarters.
Frontier lost $43 million in Q1, with CEO Barry Biffle saying that results "reflect softer travel demand primarily during March, with current booking trends suggesting demand for May and early summer travel has now stabilized."
Frontier indicated that it does not subscribe to the theory that legacy business models are best positioned for this down cycle. The airline's low-cost structure, it said, "will provide resiliency in navigating through the current environment."
It's a point that could have merit. Katy Nastro, travel expert for Going, which alerts members to airfare bargains, noted that there is so much uncertainty about the remainder of 2025 that Frontier, along with Delta, has pulled its standard full-year guidance for the year.
"We think that if we are heading into a big economic downturn, low-cost carriers may actually be the ones that come out OK," she said. "If people aren't going to spend a ton on international travel or premium, they're going to look for the cheapest tickets possible, and those are going to be with the low-cost carriers."
Indeed, there is no guarantee that premium and long-haul demand will hold up. In an April 22 report, Bloomberg Intelligence analyst George Ferguson noted that the euro has appreciated 10% relative to the dollar since the new year. With analysts expecting the dollar's value to erode further amid uncertainty over Trump administration fiscal policy, Ferguson predicts U.S.-origin transatlantic travel will falter.
Still, Delta and United entered the downtown having reported the strongest results in the industry over the past two years -- cushions that will give them flexibility to sell more seats as basic economy inventory should they so choose, competing more directly on price with the discount carriers.
United chief commercial officer Andrew Nocella said that's exactly what the carrier is doing this quarter. The move will reduce the airline's average ticket prices, but United expects to fill more seats as a result, buoying market share.
United and Delta also boasted that they can rely on high-margin credit card and loyalty program revenues, combined with brand-loyal customers, to pull them through the downturn in a way that other airlines cannot.
For example, Delta reported $2 billion in American Express remuneration in the first quarter.