Southwest Airlines becomes the latest US carrier to pull its full year financial forecast, as the airline cited current macroeconomic uncertainty, as US President Donald Trump's tariff war continues to impact the industry.
The airline said it is not able to reaffirm its previous forecast of $1.7bn in earnings before interest and taxes in 2025 and about $3.8bn in 2026.
As well as dropping its forecast for the year, Southwest said it is now “proactively reducing capacity” in the second half of 2025 to accommodate a lower demand environment and capture associated cost savings.
Capacity is expected to be reduced in both the third and fourth quarter of the year, with full year 2025 capacity now anticipated to be up roughly 1% in comparison to 2024, which would be on the low end of prior expectations of a capacity increase of between 1-2%.
This modest growth is driven entirely by an increase in aircraft utilisation provided by redeye flying and turn time reduction initiatives, Southwest confirmed.
Airlines including Delta, Frontier and United have all stated that they will be cutting capacity later in the year, again citing the uncertain economic environment that the implementation of tariffs has created.
“While the broader economic environment has been dynamic, we remain focused on executing our transformational plan,” commented Bob Jordan, president, chief executive officer, & vice chairman of the board of directors at Southwest Airlines. "We expect to introduce basic economy and bag fees for most fare products next month and remain on track to begin selling assigned and extra legroom seats in third quarter 2025 for operation beginning in first quarter of next year,”
Jordan reaffirmed that these initiatives are expected to improve the airline’s commercial offering and financial performance, providing value for both customers and shareholders.
During the first quarter of the year Southwest reported an adjusted loss of $0.13 per share. Operating revenue for the quarter rose 1.6% on the year prior to $6.4bn, marking an all-time first-quarter record. Passenger revenues also reached a new first-quarter high of $5.8bn, up 1.7%. Revenue per available seat mile (RASM) increased 3.5% on the same period of 2024, topping company guidance.
Southwest ended the quarter with $9.3bn in liquidity, including $8.3bn in cash and short-term investments and a fully available $1bn revolving credit facility. Total debt stood at $6.7bn, while the company maintained a net cash position of $1.6bn.
Additionally, the airline received 11 new 737 MAX 8 aircraft and retired 14 older jets, ending the quarter with a fleet of 800 aircraft. Capital expenditures totalled $501 million, partially offset by $24 million in sale-leaseback proceeds.