The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Jeffrey Goldfarb

NEW YORK, March 11 (Reuters Breakingviews) - Ladies and gentlemen, we have begun our economic descent. Southwest Airlines LUV.N on Tuesday followed rival Delta Air Lines DAL.N in warning that its first-quarter financial results would be worse than originally anticipated. Increasingly nervous investors have already sent U.S. markets tumbling as they bail out of technology stocks. Although that’s probably a sensible check on exuberant valuations, the news from U.S. carriers is a more worrying sign of genuine distress.

If the weaker short-term revenue outlook was limited to Southwest, which is scrambling to remake itself in part by ending its signature “bags fly free” policy, the significance might be limited. Coming a day after Delta slashed its top- and bottom-line forecasts for the first three months of the year by half, it paints a grimmer picture. Delta Chief Executive Edward Bastian cautioned that domestic flyers have been spooked by a spate of crashes and near-misses across the industry, but he also warned that business and leisure travelers alike are less confident amid a chaotic policy barrage from the White House.

Airlines are often a reliable barometer of an impending slowdown because travel is an easy place for consumers and companies to cut back on discretionary spending. For example, Delta’s revenue dropped 12% between the third and fourth quarters of 2007 as it swung to an operating loss. The global financial crisis shortly followed. It did not generate a net profit again until June 2010.

There are growing indications that Americans are nervous about what the future holds. Inflation concerns ticked up again, according to a closely watched Federal Reserve Bank of New York survey released on Monday. The proportion of households expecting their financial situations to deteriorate a year from now also exceeds 27%, the highest level since November 2023.

Delta’s share price suffered on Monday, but Big Tech has borne the brunt of the spreading fear. Apple AAPL.O, Microsoft MSFT.O, Nvidia NVDA.O and their big technology peers lost roughly $750 billion of combined market value in a rout triggered by mounting concerns over a growing trade war, a potential U.S. government shutdown and President Donald Trump’s refusal to rule out the possibility of a recession. Still, the so-called Magnificent 7 stocks have become over-inflated, trading at 28 times forward earnings at the end of February, a 40% premium to the rest of the S&P 500 Index .SPX, according to LSEG. In that sense, the selloff is less disquieting than the downward trajectory airlines are detecting.

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CONTEXT NEWS

Discount carrier Southwest Airlines on March 11 warned that it expected to generate less revenue in the first quarter than it had originally projected as it unveiled plans to start charging some customers for checked luggage, ending its signature “bags fly free” policy.

Revenue per available seat mile will likely rise by between 2% and 4% from a year earlier, Southwest said, down from the 5% to 7% gain that it previously guided.

Delta Air Lines said on March 10 that its revenue in the first quarter would be up 3% to 4% year-over-year, compared to its initial projection of 7% to 9%. The airline also said it expected earnings per share of about 30 cents to 50 cents, down from 70 cents to $1.

(Editing by Jonathan Guilford and Pranav Kiran)

((For previous columns by the author, Reuters customers can click on GOLDFARB/jeffrey.goldfarb@thomsonreuters.com))