Alaska Airlines and Southwest Airlines Face Weaker Demand amid Economic Uncertainty

In a concerning trend for the US airline industry, both Alaska Airlines and Southwest Airlines reported subdued short-term demand and anticipated slower growth moving forward. On April 23, Southwest Airlines announced it had begun trimming its network to address this demand slump, projecting a mere 1% increase in full-year passenger capacity. This figure reflects a stagnant growth outlook, largely attributed to economic concerns. Meanwhile, Southwest's first-quarter loss narrowed to $149 million from the previous $231 million, but they foresee a bleak immediate future, with available seat kilometers (ASKs) expected to rise only 1-2% in the second quarter, and revenue per available seat kilometer potentially decreasing 4%. Similarly, Alaska Airlines reported a first-quarter loss of $166 million, contrasted against a net loss of $132 million last year, although their ASKs surpassed earlier forecasts. Alaska's guidance indicates up to a 6% revenue decline due to demand softness in the second quarter, as passengers book flights at lower fares than anticipated. This shift in consumer behavior signals a broader industry-wide challenge, impacting projections for profitability and growth, echoing the sentiments of executives from Delta and United Airlines who have voiced similar concerns. Alaska’s CEO, Ben Minicucci, expressed confidence in the airline's resilience and adaptability during these turbulent times, emphasizing that the company is positioned to navigate the uncertainty. Overall, the outlook for the airline sector appears cautious as macroeconomic factors continue to dictate consumer travel behavior and airlines re-evaluate their growth strategies.