Southwest Airlines became the latest US carrier on Wednesday to withdraw its financial forecast as President 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.
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.
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.
This marks a dramatic reversal in the fortunes of US 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 that mostly rely on price-sensitive leisure customers and predominantly serve the US 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.
Southwest said bookings softened throughout the March quarter in domestic leisure travel, where the airline has more exposure compared to its rivals like Delta and United.
There are few signs that the situation has improved as the company said its unit revenue – a proxy for pricing power – would decline as much as 4% from a year ago in the current quarter.
Weakening travel demand has compounded the challenge for Southwest, which has been struggling to find its footing after the COVID-19 pandemic. Its lackluster earnings have fueled pressure to revamp its business model.
Last year, Southwest announced plans to end open seating, which had been central to its brand image for more than 50 years. In March, it unveiled plans to start charging customers for checked bags, ending a unique free policy.
Southwest said it has seen no evidence of customers ditching the airline following recent policy changes. CEO Bob Jordan said the airline expects to introduce basic economy and bag fees next month and remained on track to begin selling assigned and extra legroom seats in the September quarter.
To protect its margins amid softening demand, it is proactively reducing capacity, or seats on its flights, in the second half of the year.
Southwest reported an adjusted loss of 13 cents a share in the first quarter compared with a loss of 18 cents per share expected by analysts, according to LSEG data.
The company will discuss its financial results on a call with analysts and investors on Thursday.
This story originally appeared on NYPost
