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Southwest Airlines deeply slashed its profit outlook for 2025, blaming weak domestic demand as it pushes forward with “transformational” changes driven by an activist hedge fund investor.
Southwest Airlines stock plummeted Thursday after the company slashed its profit outlook for the ... More
Southwest’s share price was down more than 12% early Thursday afternoon after the carrier cut its forecast for full-year earnings before taxes to $600 million to $800 million—53% to 65% below its earlier estimate of $1.7 billion.
The Dallas-based carrier missed Wall Street’s second-quarter earnings consensus estimates by 16%.
Even so, Southwest executives said travel demand has begun to stabilize compared to April, when the carrier pulled its 2025 financial guidance due to economic uncertainty in the wake of President Donald Trump’s “Liberation Day” tariffs.
The airline’s executives noted weaker demand for domestic main cabin (economy) leisure travel this year—echoing what Delta, United and American reported.
Southwest Airlines is undergoing what CEO Bob Jordan characterized to investors on its quarterly earnings call Thursday as a “transformational period.” In June 2024, Southwest became the target of activist hedge fund investor Elliott Investment Management, which took a $1.9 billion stake in the carrier and presented a plan to achieve a $49 price per share “within 12 months.” While far from a majority, Elliott’s roughly 11% interest in the company was enough to give it an outsized voice as one of the airline’s largest single shareholders. The next month, Southwest conceded to many of Elliott’s key asks and announced sweeping changes to its business model, including ditching its half-century open seating model in favor of assigned seats; offering premium, extended legroom seats; and introducing overnight “red-eye” flights. By October, Southwest had agreed to restructure its board to avert a proxy fight. Southwest’s share price was about $33 on Thursday afternoon.
“We anticipate [Southwest] will remain a controversial stock,” Savanthi Syth, an analyst at Raymond James covering the airline sector, wrote to investors, noting Southwest also announced a new $2 billion share buyback program to be completed in up to two years.
No. In May, the global airline industry reported 5% growth in demand compared to the same month last year, with Asia-Pacific taking the lead at 9.4% growth. “The outlier was North America, which reported a 0.5% decline, led by a 1.7% fall in the US domestic market,” according to the latest monthly report from the International Air Transport Association (IATA).
While U.S. airlines say they see increased domestic demand later in the year, it’s not known how Trump’s raft of tariffs—due to kick in Aug. 1—will impact consumer confidence. Typically, tariffs lead to higher inflation, which tends to contract discretionary spending on items like vacations.
In a Securities and Exchange Commission filing in March, Southwest cited “less government travel” as one reason for lowering its full-year outlook.
American Airlines Stock Down 8% As Weak Domestic Demand Dims Outlook (Forbes)