Southwest Airlines misses Q2 profit estimates as US travel demand wavers
Lingering uncertainty about the broader economy and rising living costs in the aftermath of President Donald Trump's trade war have taken a toll on carriers that primarily service the U.S. domestic market and price-sensitive customers. To stimulate demand, they have been leaning on fare discounts.
Southwest's shares were down 2% after the bell.
The company said it expects $600 million-$800 million in earnings before interest and taxes this year, less than half its previous forecast of $1.7 billion.
Still, Southwest said domestic leisure travel demand has stabilized and is showing signs of improvement.
Southwest said its unit revenue, or revenue generated from each seat, in the current quarter is expected to be in the range of down 2% to up 2% from a year ago.
In April, several major U.S. carriers scrapped their financial forecasts, citing uncertainty linked to President Donald Trump's broad tariff measures and government spending cuts, which pressured consumers to scale back travel plans.
Since then, airline executives and analysts have signaled that demand trends and the broader travel environment are showing signs of steadiness.
Even so, the domestic market remains under pressure, with cost-conscious travelers remaining cautious as household budgets tighten.
Summer, typically the peak money-making season for airlines, is falling short this year as sluggish demand for standard economy seats forces carriers to cut fares, undermining their pricing power.
Delta Air Lines (DAL.N), opens new tab and United Airlines (UAL.O), opens new tab have seen strong revenue gains from premium cabins, buoyed by affluent travelers willing to pay for upgrades.
By contrast, low-fare
carriers such as Southwest
are under pressure to maintain profitability as price-sensitive travelers remain cautious with discretionary spending.
Southwest reported an adjusted profit per share of 43 cents, compared with analysts' average expectations of 51 cents, according to data compiled by LSEG.
It reported operating revenue of $7.24 billion in the quarter through June, compared with $7.35 billion a year earlier.
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