Both American Airlines and Southwest’s chief financial officers conveyed similar notes of optimism for 2025 despite the rocky start to the year with demand dipping amid economic uncertainty.
Speaking separately at the Wolfe Global Transportation and Industrials Conference, American CFO Devon May and Southwest’s newly appointed EVP and CFO Tom Doxey both spoke of the softening demand environment seen in the first quarter. After reporting their first quarter guidance, both airlines pulled their full year guidance, along with several other US carriers.
“This year has not unfolded as we would have expected back in January,” said May during the conference.
American had reported a first quarter 2025 GAAP net loss of $473 million loss, excluding special items, the loss was $386 million. Total unit revenue was up 0.7% but first quarter costs rose 7%.
During the company’s earnings call, May said that the airline was continuing to pursue savings via an efficiency drive and productivity despite headcount remaining flat. “We expect to achieve approximately $250 million in cost savings in 2025 on top of the $500 million achieved last year,” he said.
Southwest had reported a net loss of $149 million in the first quarter. Additionally, the airline had said it was “proactively reducing capacity” in the second half of the year to mitigate the impact of lower demand. Other US carriers had similarly pulled capacity for 2025.
“Some of that uncertainty is why you saw most carriers pulling capacity in the year because you don’t need to get a firm answer on some that stuff before you start making a decision on what you’re going to do,” said Doxey during the conference. “We wanted to be decisive. And whichever side it ends up being, we wanted to make sure that we were making adjustments that would allow us to react and control what we could.”
Southwest reduced capacity by around 1.5 percentage points for the second half of the year, which Doxey said will put the company in the lower end of its 1% to 2% capacity guidance for the year.
Doxey reiterated previous earnings call guidance that second quarter unit revenues are expected to be “about six points worse than what we were expecting at the beginning of the year”. Additionally, Southwest’s first quarter unit revenues were around three points below expectations at the start of 2025.
“We have a lot of industry data, and we haven’t seen in the industry an inflection back yet,” Doxey admitted.
However, Doxey reiterated the company’s $1.8bn in expected incremental EBIT for the year, and more than $4bn in 2026. This is being driven by the company’s revenue optimisation and cost reduction initiatives, as well as the introduction of its new basic economy fares from next week.
Doxey added that the rationale behind its new economy offerings was because the “lion’s share” of its bookings went through the lowest tier fare ‘want to get away’. “The answer to why is obvious,” explained Doxey. “There was so much included in that bottom category that there was no incentive to buy up.”
He underpinned that flights booked this week – even scheduled for beyond the new model – prior to the new model will still retain the current structure. The timing of its introduction largely contributes to the difference in incremental EBIT for this year compared to 2026.
In addition, the company’s new seat assignment model will begin sales next year.
“That’s what’s so exciting for us is that as we start to look to 2026,” said Doxey. “Maybe we’re not at a full run rate for each one of these things as we get into 2026, but they ramp up significantly as we move toward back part of this year and there’s a significant amount of these new initiatives as we get into 2026.”
For American, May pointed to the airline’s fleet efficiency, modest capital expenditures and robust balance sheet improvements, which have placed it in a strong position to contend with the current uncertainties.
“If demand trends stabilise, we’ll be profitable for the full year,” May said. “We’ll produce free cash flow and we’re still targeting margin expansion and meaningful free cash in the future.”
May added: “In general, it absolutely is stabilised,” he said. “We are seeing some nice booking trends, but for the most part, they’re largely in line with the conversations we were having on our earnings call in late April. We guided our total revenue to be down 1-2% for the quarter. That’s still where we expect things to come out. But it’s all perspective. It’s just a matter of timing.”
He noted that while leisure demand has stabilised, it is “at a lower level than what we’d expect at the start of the year”.
In addition, he pointed to the strength of the company’s international market – particularly transatlantic and premium flying. For the first quarter, American’s international unit revenues were up 2.9%. Furthermore, he noted that the recovery of the company’s regional capacity was another driver of optimism for American.
“Regional is maybe not a huge component of the business when it comes to ASM capacity, but when you talk about filling out the hubs and being able to offer really deep schedules into a lot of these small and medium-sized communities, it is a really important part of the business,” said May.
Doxey also noted that the company was more confident in aircraft deliveries for the year.
“We’ve got 50 aircraft retirements for the year,” he explained. “Our current planning assumption for aircraft coming in from Boeing is 38. As the year goes on, we are getting a little more comfortable with some potential upside to that number, which could result in more retirements for us.”
Neither airline has committed to reinstating their full year guidance as the demand softness continues while economic uncertainties and tariff trade wars unravel, as well as the lingering supply chain constraints. However, both Doxey and May echoed sentiments of optimism for the future with an industry that has consistently proven itself to be resilient against adversity.