By Rajesh Kumar Singh
CHICAGO (Reuters) -Southwest Airlines (LUV) 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.
Southwest Airlines stock fell 4% in premarket trading on Thursday.
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.
As of 12:17:15 PM EDT. Market Open.
Southwest’s shares were down 3% in after-hours trading.
Alaska Air Group (ALK) 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 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 that 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.
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.
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