By Alison Sider

A pullback in travel demand is hurting Southwest Airlines and the airline dropped its full-year business projections given uncertainty about the overall economy.

The details

The airline on Wednesday pulled its estimates for earnings before interest and taxes for 2025 and 2026, but affirmed that new initiatives to improve its financial performance are still on track.

Southwest reported a net loss of $149 million in the first quarter -- a contrast to rivals United Airlines and Delta Air Lines that posted profits for the first three months of the year. On an adjusted basis, Southwest's loss of 13 cents a share was smaller than the 18-cents-a-share loss analysts were expecting.

The carrier said its first-quarter revenue was a record. But demand weakened throughout the quarter and sales softened, particularly for domestic leisure travel.

Southwest shares fell 4% in after hours. The stock closed regular trading Wednesday up 3.1% to $25.52.

The context

Airlines that started the year with high hopes have faced a murkier outlook amid fear that the U.S. economy will face slower growth, higher inflation, and greater risk of recession.

Delta ditched its guidance for the year, citing the uncertainty. United offered two forecasts for two different economic scenarios, but said it expects to post profits no matter what.

Southwest on Wednesday joined Delta and United saying that it expects to slow growth in the second half of the year.

Waning consumer confidence and fears of a broader economic downturn have left big airlines relying even more on wealthy customers who are willing to spend more to sit in premium seats.

Those trends leave Dallas-based Southwest in a difficult spot, unable to take advantage of the strategies that are still working well for other airlines. It doesn't fly to far-flung overseas destinations in Europe and Asia -- places Americans still want to travel. And it has lagged behind in offering more high-end experiences customers are willing to pay up for.

Southwest is in the process of converting its planes to add extra legroom sections and doing away with its hallmark open seating and unique boarding process, in hopes of convincing passengers to open their wallets.

Next month, Southwest plans to start charging many customers for checked bags, a seismic shift that provoked sharp outcry from the airline's fiercely loyal clientele. The carrier hasn't yet said what the fees will be.

Tony Roach, the airline's executive vice president of customer and brand, acknowledged that customers were disappointed by the policy change but said in an interview that the announcement hasn't resulted in a dramatic change in bookings.

Since Southwest last year faced down an activist investor, its management has gone through an overhaul, with some senior executives like its longtime chief financial officer departing. And the carrier earlier this year announced plans to cut costs by eliminating 1,750 corporate jobs in its first mass layoff--a blow to its storied culture.

Write to Alison Sider at alison.sider@wsj.com

(END) Dow Jones Newswires

April 23, 2025 17:14 ET (21:14 GMT)

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