As proof that President Trump’s tariffs are rippling across nearly the entire U.S. economy, Southwest Airlines (LUV) said in a securities filing last week that it will be reducing flights this year.
What makes this especially significant is the fact that Southwest is a domestic carrier; it doesn’t fly internationally. Yet it’s feeling the same strain as global businesses.
The company said it expects second-quarter revenue to be flat or down as much as 4%.
Like rivals American Airlines and Delta Airlines, Southwest also cut its 2025 guidance outlook in its Q1 earnings report on Wednesday.
"Amid the current macroeconomic uncertainty, it is difficult to forecast given recent and short-lived booking trends," the company said in its filing.
Ironically, Southwest actually posted better-than-expected Q1 numbers, perhaps reflecting how business held up before Trump’s broader tariff policies took effect in April.
The airline reported $6.43 billion in revenue, slightly ahead of the $6.40 billion consensus estimate from LSEG. Revenue rose 1.6% year over year.
Southwest’s adjusted loss per share was 13 cents, better than Wall Street’s forecast of an 18-cent loss.
Despite the earnings beat, Southwest’s stock is down 21.9% year to date and 24.3% over just the past month (or since Trump enacted his "Liberation Day" tariffs.)
Meanwhile, American Airlines (AAL) CEO Robert Isom said the company started seeing a drop-off in bookings back in February, about a month after Trump took office.
"We came off a strong fourth quarter, saw decent business in January, and really domestic leisure travel fell off considerably as we went into the February time frame," he told CNBC’s "Squawk Box."
American’s Q1 revenue came in at $12.55 billion, just under the $12.6 billion consensus, according to LSEG. Its adjusted loss per share was 59 cents, slightly better than the expected 65-cent loss.
The company expects Q2 revenue to range from down 2% to up 1% year over year. Wall Street had been projecting 2.2% growth.
Shares of American Airlines have plunged 44.6% year to date and are down 16% over the past month.
Delta Airlines (DAL) also pulled back its forecast, now expecting flat revenue in the second half of the year after previously projecting 4% growth.
Delta’s stock is down 31.5% year to date and 14.8% over the past month.
Anti-American sentiment could weigh down U.S.-based airlines
Even before the latest escalation in tariffs, U.S. airline stocks didn't fare well thanks to a pullback in discretionary spending and growing recession fears under Trump.
Now, airlines face another risk: backlash from Trump's divisive politics, including his "America First" agenda that’s alienated even the country’s closest allies.
Michael Feroli, chief U.S. economist at J.P. Morgan, said in a recent note to clients that international visitors to the U.S. are down about 5% from a year ago.
"In recent weeks there have been numerous news stories about tourists canceling trips to the U.S. in protest of the perceived heavy-handedness of recent trade policies," he wrote.
"This points to potentially another channel to consider in assessing the effects of tariffs on economic activity."
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