Southwest Airlines drops forecast as US trade war shakes industry

Core Viewpoint - The U.S. airline industry is facing significant uncertainty due to President Trump's trade war, leading to multiple carriers, including Southwest Airlines, withdrawing their financial forecasts for the upcoming years [1][5]. Company Summary - Southwest Airlines has retracted its previous earnings forecast of $1.7 billion for 2025 and approximately $3.8 billion for 2026, citing macroeconomic uncertainty and fluctuating booking trends [4]. - The airline's shares fell by 3% in after-hours trading following the announcement [4]. - Southwest has reported a decline in domestic leisure travel bookings throughout the March quarter, which is critical as it primarily serves price-sensitive leisure customers [10][12]. - The company is proactively reducing capacity in the second half of the year to protect its margins amid softening demand [16]. - Southwest's adjusted loss in the first quarter was 13 cents per share, which was better than the expected loss of 18 cents per share [16]. Industry Summary - The trade war is contributing to a pullback in travel spending as both consumers and businesses are hesitant to spend on discretionary travel [2]. - Other airlines, including Alaska Air Group, Delta Air Lines, and United Airlines, have also withdrawn or altered their profit forecasts due to the prevailing economic uncertainty [5]. - The domestic travel market is currently the weakest, with airlines needing to lower fares to stimulate demand [9]. - The overall sentiment in the airline industry has shifted dramatically from optimism about strong travel demand to concerns over potential economic slowdown and its impact on profitability [8].