Southwest Airlines executives Thursday afternoon noted that the current macroeconomic environment had weakened demand as the quarter progressed, and those "softer booking trends continue into the second quarter," Southwest president and CEO Bob Jordan said on the carrier's first-quarter earnings call.
The airline's corporate travel segment, excluding a small percentage from government—local, state and federal, which slowed markedly starting in January—"has also been softer but stable," chief operating officer Andrew Watterson said. Aside from the government sector, "the rest of it is up and stable."
When an analyst asked about the size of the government exposure, Watterson said that what "sticks in my head was you take out government, and we're up like 4 percent in managed business."
Demand from the insurance, technology and banking sectors was up for the quarter, Watterson added. Manufacturing and health care demand was down "a little bit, so I would consider those just the normal kind of vagaries of industries moving up and down."
Watterson noted that an economic slowdown usually "shows up in business first, and business travel is highly correlated with corporate earnings." However, "corporate earnings have held up. Business travel has held up. So, we're pleased with that," he said. Leisure and customers' discretionary travel represent "the crux of the slowdown. But steady as she goes with managed business travel is certainly welcome."
In addressing questions about the changes announced during the first quarter, which include adding baggage fees, changing the Wanna Get Away fare to Basic Economy, and adding expiration dates to flight credits, Watterson said that "after announcing these changes, we saw no evidence of book away [in] real-time data."
Southwest Q1 Metrics
Southwest reported first-quarter passenger revenue of $5.81 billion, up 1.7 percent year over year. Total revenue was nearly $6.43 billion, an increase of 1.6 percent compared with the prior year. The net loss was $149 million versus a net loss of $231 million in Q1 2024.
The carrier's second-quarter guidance included a capacity increase of 1 percent to 2 percent year over year, with revenue per available seat mile projected to be flat to down 4 percent. The average fuel cost is projected to be $2.20 to $2.30 per gallon. The guidance "contemplates a continuation of the current environment with the largest impact coming from lower leisure travel demand," Watterson said.
Southwest, like other airlines, did not reiterate its full-year 2025 or 2026 targets because of current macroeconomic uncertainty.
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