Southwest CEO says US airline industry already in recession
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Southwest is among a growing number of airlines pulling financial guidance for 2025 as economic uncertainty hurts demand for travel.
PHOTO: AFP
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DALLAS – Southwest Airlines’ chief executive officer isn’t waiting for economists to declare a technical downturn in the US economy: As far as he’s concerned, a recession has already started.
Noting demand for domestic leisure travel has dropped more than he’s ever seen outside of the Covid-19 pandemic, Mr Bob Jordan said on April 24 that an economic contraction is in full swing, at least in the US airline industry.
The CEO said his company expects second-quarter revenue to fall by six percentage points, following a three-point decline in the first three months.
“I don’t care if you call it a recession or not, in this industry that’s a recession,” Mr Jordan said in an interview.
Southwest is among a growing number of airlines pulling financial guidance for 2025 as a lack of economic clarity feeds uncertainty among consumers, making it impossible to accurately forecast what will happen with travel demand and pricing.
US President Donald Trump’s trade war, government job cuts and questions surrounding US border policies also have helped erode domestic demand and travel into the United States from Canada and Europe, carriers have said.
Southwest is more dependent on domestic leisure travelers for revenue than US peers with more extensive international operations and corporate business clients. That leaves its bookings vulnerable to sudden shifts in American consumers’ sentiment.
“When consumers are uncertain, they pull back,” Mr Jordan said. “Consumers can immediately stop spending.”
American Airlines Group withdrew its full-year earnings outlook on April 24. The major carrier said it would aim to reinstate its outlook if and when business conditions stabilise.
“Uncertainty is what we’re living with now. It’s something I know the country wants to move beyond,” American Airlines CEO Robert Isom said on a conference call with analysts. Domestic leisure travel remains weak, but international and business travel remain on track, he said.
Delta Air Lines and the parent of Frontier Airlines also pulled their 2025 guidance. Waning confidence among consumers and businesses have “flat-lined” revenue growth, Delta said earlier this month. United Airlines Holdings took the unusual step last week of offering dual earnings forecasts, one for a stable environment and a reduced one based on a recession.
“The revenue environment has quickly deteriorated,” Mr Conor Cunningham, a Melius Research analyst, wrote in a research note. American Airlines and its large peers are shifting more seats to lower fares to stoke demand, but he wrote that’s likely to weigh on margins and also hurt smaller carriers dependent on bookings from those same price-sensitive travellers. BLOOMBERG
