Southwest Airlines cuts capacity, pulls guidance
SlateStone Wealth chief market strategist Kenny Polcari analyzes how the market responded to the week’s headlines and what the future outlook holds on ‘Maria Bartiromo’s Wall Street.’
Southwest Airlines became the latest U.S. carrier on Wednesday to withdraw its financial forecast as President Donald Trump’s trade war has created the biggest uncertainty for the industry since the COVID-19 pandemic.
With little clarity on how consumers will behave in the face of a potentially worsening economy, airlines are struggling to accurately forecast their business.
Travel is a discretionary item for many consumers and businesses. With the trade war raising the prospect of slower economic growth and higher inflation, both tourists and corporations are sitting tight, leading to a pullback in travel spending.
A Southwest Airlines Boeing 737 takes off from Las Vegas International Airport in Las Vegas on Feb. 8, 2024. (Reuters/Mike Blake / Reuters)
Southwest said it is not able to reaffirm its previous forecast of $1.7 billion in earnings before interest and taxes in 2025 and about $3.8 billion in 2026.
“Amid the current macroeconomic uncertainty, it is difficult to forecast given recent and short-lived booking trends,” the company said.
Southwest’s shares were down 3% in after-hours trading.
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Alaska Air Group also pulled its 2025 profit forecast on Wednesday, citing the prevailing macroeconomic uncertainty.
Earlier this month, Delta Air Lines and Frontier scrapped their forecasts. Last week, United Airlines gave two different forecasts, a highly unusual move, saying it was impossible to predict the macro environment this year.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| LUV | SOUTHWEST AIRLINES CO. | 26.46 | +0.94 | +3.68% |
| ALK | ALASKA AIR GROUP INC. | 41.51 | -4.60 | -9.98% |
| DAL | DELTA AIR LINES INC. | 42.02 | +0.62 | +1.50% |
| ULCC | FRONTIER GROUP HOLDINGS | 3.19 | -0.04 | -1.08% |
| UAL | UNITED AIRLINES HOLDINGS INC. | 69.05 | +1.02 | +1.50% |
A Delta Boeing 767 arrives at John F. Kennedy International Airport in New York on Feb. 7, 2024. (Charly Triballeau/AFP via Getty Images / Getty Images)
This marks a dramatic reversal in the fortunes of U.S. carriers, which were flying high about two months ago on talk of a new golden age, as strong travel demand and tight industry-wide capacity raised the prospect of a multi-year profit boom.
The lot is worse for airlines like Southwest, which mostly rely on price-sensitive leisure customers and predominantly serve the U.S. domestic market.
The domestic market is currently the softest travel market, with airlines having to stimulate demand with lower fares. And consumer spending is the weakest among lower-income households.
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Southwest said bookings softened throughout the March quarter in domestic leisure travel, where the airline has more…