Southwest drops more bad news amid 'macroeconomic uncertainty'

The airline's first-quarter earnings fell below expectations.

Apr 25, 2025 - 00:38

Southwest drops more bad news amid 'macroeconomic uncertainty'

Even though some are riding the economic ebbs caused by the Trump administration's sudden policy shifts better than others, almost all airlines are struggling with the impact of tariffs and low consumer confidence.

Delta Air Lines (DAL) CEO Ed Bastian named "broad economic uncertainty" as the reason the airline had to cut growth forecasts for 2025 from the previous 6% and 8% to just 2%.

United Airlines (UAL) also recently told investors that the industry is "marching toward a recession scenario," while Alaska Airlines (ALK) just reported that it now expects second-quarter revenue to be down 6% from the previous year.

Southwest Airlines (LUV) has also issued first-quarter results that show a net loss of $149 million during the same time period. All this comes after a period of major restructuring that, amid pressure from major investor Elliott to immediately reverse poor financial performance, saw the ouster of multiple executives and the end of Southwest's free bag policy.

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'It is difficult to forecast,' Southwest says in securities filing

In an April 23 filing to the Securities and Exchange Commission (SEC), Southwest said that it now expects second-quarter unit revenue to be down by 4% from the same quarter last year.

"Amid the current macroeconomic uncertainty, it is difficult to forecast given recent and short-lived booking trends," Southwest wrote in the filing.

Total revenue of $6.43 billion is below the $6.40 billion predicted by a consensus of LSEG analysts, while 13 cents loss per share is below the expected 18 cents.

While $6.43 billion in revenue is a 2% increase from the $5.8 billion reported last year, the small gain is not enough to offset impacts such as oil prices, lower traveler numbers, and problems caused by delayed deliveries of Boeing (BA) planes.

The net loss of $149 million is, however, an improvement from the $231 million reported in the first quarter of 2024.

Southwest Airlines has recently rolled out a series of unpopular cost-cutting measures.
Image source: Kevin Dietsch/Getty Images

Bob Jordan tells investors that the airline is seeing 'positive results'

In an effort to reassure investors, Southwest said that it expects the savings from laying off 1,750 employees or roughly 15% of its workforce last February to total approximately $210 million in 2025 and $300 million in 2026.

"We are seeing positive results on recently rolled out initiatives [...]," Southwest CEO Bob Jordan, who got to keep his spot at the helm despite earlier efforts to oust him by proxy battle, said in a statement on the earnings. "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."

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Even so, multiple aviation analysts have pointed out that Southwest's outlook is not as rosy as the carrier makes it seem.

Perks such as open seating and two free bags regardless of fare class, both of which the airline got rid of in the last year in a drastic effort to improve its balance sheet, were what earned Southwest its longstanding customer loyalty and pushed many travelers to choose it over other carriers. Going forward, it will need to stand out from multiple budget airlines all offering similar products in what is already a difficult economy.