United Airlines is facing a potential financial setback as the federal government's restructuring efforts lead to reduced travel by government employees. Since the changes initiated post-Trump inauguration, there has been a noticeable decline in travel demand from this sector. With government travel accounting for 2% of United’s business, even a minor reduction can translate into significant losses for the airline. Despite these challenges, the company remains optimistic about filling the gap with other types of demand.

The CEO of United Airlines highlighted during a Barclays conference that government employee travel has noticeably decreased. This decline stems from mass layoffs and buyouts led by the Department of Government Efficiency (DOGE). Federal employees, who are restricted to using American-owned airlines, have become less frequent flyers due to these workforce reductions. The airline industry, particularly United, stands to lose millions of dollars given its substantial passenger revenue.

In 2024, United generated nearly $52 billion in total passenger revenue. Even a slight dip in government passengers could result in considerable financial impact. The CEO expressed uncertainty about how long this trend will persist but noted that other types of demand are quickly replacing the shortfall. The airline's stock has surged 142% over the past year, driven by post-pandemic travel recovery and robust international flight schedules.

Federal employees' travel restrictions have been in place since 1974, mandating that they use only American-owned carriers like United, Delta Air Lines, Southwest, and Alaska Airlines. Recent layoffs and buyouts across US government agencies have significantly impacted travel patterns. Approximately 75,000 federal employees accepted buyout offers, representing 3.75% of the workforce. These changes aim to enhance productivity and reduce federal spending, affecting not just United but other companies reliant on federal contracts.

While United Airlines faces potential financial challenges from reduced government travel, it continues to adapt by focusing on diverse sources of demand. The airline's resilience in the face of these changes underscores its broader strategy to maintain stability and growth amid shifting market conditions. Other companies with federal government customers are also reassessing their strategies to ensure investor confidence remains strong.