Southwest Airlines is the latest US carrier to withdraw its financial forecast due to President Donald Trump’s trade war, which has created uncertainty in the industry since the COVID-19 pandemic. Several other airlines, including Alaska Air Group and Delta Air Lines, have also pulled their forecasts.
The uncertainty surrounding consumer behavior in a potentially worsening economy is making it difficult for airlines to accurately forecast their business. Travel is a discretionary item, and with the trade war raising concerns about slower economic growth and higher inflation, many tourists and corporations are delaying travel plans, resulting in reduced travel spending.
Southwest Airlines now expects lower earnings before interest and taxes in 2025 and 2026 due to macroeconomic uncertainty. The company cited recent and short-lived booking trends as the reason for its revised forecast. Its shares have fallen by 3% in after-hours trading.
The situation has been further complicated by the decline in travel demand, which has hit Southwest’s efforts to increase revenue. The airline had previously announced plans to introduce basic economy and bag fees, but has now put these changes on hold due to softening demand.
To mitigate losses, Southwest is reducing capacity in the second half of the year. The company reported an adjusted loss of 13 cents a share in the first quarter, which was better than expected by analysts. A conference call with analysts will be held on Thursday to discuss its financial results.
Source: https://www.foxbusiness.com/markets/southwest-airlines-drops-forecast-us-trade-war-shakes-industry