CHICAGO, Illinois: All U.S. airlines are feeling the impact of falling travel demand caused by President Trump’s trade war. But low-cost carriers like Southwest, Frontier, and JetBlue are being hit the hardest.

In the first part of the year, these budget airlines experienced significant declines in profits. In contrast, full-service airlines such as Delta and United have managed to maintain steady operations despite a decrease in passenger numbers.

Experts believe the gap between low-cost and full-service airlines will continue to grow. This differs from past slowdowns, when budget airlines, especially Southwest, typically performed better than others.

This time, there is a significant rise in demand for premium travel, such as first and business class, and loyalty programs are proving more valuable. These trends are helping bigger airlines stay strong.

Budget airlines are still trying to recover financially after the pandemic. They are now reducing their flight schedules to avoid incurring further losses, while United and Delta are increasing their flight operations and offering lower fares to attract travelers.

Experts say that big airlines have a clear plan: to keep existing customers and win over travelers who typically fly budget airlines.

JPMorgan analyst Jamie Baker said, “In the past, Southwest led the way during hard times. Now it’s United and Delta’s turn.”

Premium travel is booming, and airlines like Delta, United, and Alaska have invested heavily to capitalize on this trend. Delta now generates 41 percent of its passenger revenue from premium seats, up from 35 percent prior to the pandemic.

This shift means airlines no longer depend as much on business travel. United recently stated that business travel now accounts for a smaller share of its revenue than it did before the COVID-19 pandemic.

Wealthy travelers are still spending more, according to Bank of America data, which is good news for the bigger airlines.

Alaska Airlines’ finance chief said the industry’s focus on premium travel is here to stay.

Budget airlines are attempting to enter the premium market, but their efforts are modest compared to those of full-service airlines.

Low-cost airlines primarily serve U.S. domestic travelers who are more price-sensitive. But lower-income customers are spending less now, and the U.S. market is currently the weakest for travel.

Most airlines are losing money on domestic flights, but Delta and United are benefiting from strong demand for international travel, which helps them stay profitable.

There is also a shortage of large planes for long-haul flights, which helps keep international fares high. United expects its earnings from each available seat to grow in all its global markets this quarter.

Full-service airlines are also generating significant revenue from their loyalty credit card programs. These programs generate billions of dollars because customers earn miles when they spend, and the credit card companies compensate the airlines accordingly.

For example, Delta earned nearly 20 percent of its passenger revenue last quarter from American Express.

Delta’s president said it’s not just about offering good seats—it’s about keeping customers loyal.

In the past, during economic slowdowns in 2001 and 2008, Southwest stayed strong thanks to loyal customers. However, now the airline is struggling. Costs have gone up, and the airline is trying new ways to make money—like changing its popular no-bag-fee policy.

One traveler, Ben Thomas from Dallas, said that dropping the no-fee policy might prompt him to switch airlines. “This could make flying a lot more expensive,” he said.

Southwest says it hasn’t seen many customers leave yet because of the change.

Other budget airlines are also struggling. Spirit just came out of bankruptcy, and Frontier has only been profitable once in the past five years.

Still, Frontier’s CEO, Barry Biffle, believes that low-cost airlines can bounce back. He says there are too many domestic seats available right now and that a recession would hurt business travel—possibly prompting more people to fly with budget carriers instead.

“It’s not a business model story,” he told Reuters. “It’s your concentration of geography.”