US Big 4 Detail Challenges Ahead For Airlines At JP Morgan Industrials Conference

The chief executives of the largest United States-based airlines, including American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines, spoke at the J.P. Morgan Industrials Conference, admitting that despite their previous welcoming tone towards the new administration, it has caused consumer and business confidence to go down, resulting in worsening Q1 earnings.
Changing economic environment
Except for United Airlines, the largest US airlines issued US Securities and Exchange Commission (SEC) filings before the upcoming Q1 reports, warning that the changing economic environment, namely the tariffs that have escalated into multiple trade wars and court-challenged government layoffs imposed by the Donald Trump administration, could impact Q1 earnings.
For example, American Airlines detailed that since it first issued its Q1 guidance on January 23, the revenue environment had weakened due to the impact of Flight 5342 and “softness in the domestic leisure segment, primarily in March.”
While its Q1 capacity, measured in available seat miles (ASM), and cost per ASM excluding fuel (CASM-ex) guidance remains unchanged, namely flat or -2% year-on-year (YoY) and increasing by high single digits, respectively, its total revenue should be flat instead of rising from 3% to 5%.
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As a result, the carrier’s adjusted loss per diluted share should be between $0.60 and $0.80 instead of $0.20 and $0.40.
Delta Air Lines’ guidance adjusted the total revenue, operating margin, and earnings per share (EPS) projections, including downgrading the latter from $0.70 to $1 to $0.30 and $0.50.
Related Delta Air Lines Expects Strong Travel Demand To Continue Following Record Year Despite the fallout from the CrowdStrike IT failure in July 2024, Delta Air Lines recorded record-breaking results during the year.
“The outlook has been impacted by the recent reduction in consumer and corporate confidence caused by increased macro uncertainty, driving softness in Domestic demand. Premium, international, and loyalty revenue growth trends are consistent with expectations and reflect the resilience of Delta’s diversified revenue base.”
Current / Previous Q1 revenue guidance Current / Previous Q1 capacity guidance Current / Previous Q1 CASM-ex guidance American Airlines Flat / Up 3% to 5% No change to flat to -2% guidance No change to increasing by high single digits guidance Delta Air Lines Up 3% to 4% / Up 7% to 9% ❌ ❌ Southwest Airlines Up 2% to 4% / Up 5% to 7% (revenue per ASM (RASM) guidance) Down 2% / Down 2% to 3% Up around 6% / Up 7% to 9%
Lastly, Southwest Airlines, citing “higher-than-expected completion factor, less government travel, and a greater impact from the California wildfires than originally estimated,” and “bookings and demand trends as the macro environment has weakened,” changed its RASM, ASM, fuel cost per gallon, ASM per gallon, and CASM-ex projections for Q1.
RASM guidance was downgraded from between 5% and 7% to 2% and 4%. ASM was clarified to be down around 2% (previously from -2% to -3%), while the average fuel cost per gallon should be lower, or between $2.35 and $2.45 compared to $2.50 and $2.60 previously.
Related Southwest Airlines Reports Record Revenue Of $27.6 Billion In 2024 Southwest Airlines’ chief executive outlined that 2025 will be a pivotal year for the airline.
Affecting certain markets
While, as mentioned before, United Airlines did not issue an SEC filing related to its Q1 guidance, Scott Kirby, the Chief Executive Officer (CEO) of the airline, did say during the conference that its Q1 results should be “at the low end of our guidance range.”
Kirby detailed that Trump’s economic policies have resulted in weakness in the domestic market, including government and government-adjacent travel. According to the CEO, that is 4% to 5% of United Airlines’ business, which is now down by around 50%.
“And we have seen some bleed over to that into the domestic leisure market. [The] good news is that international, long-haul, Hawaii, premium, all remain really strong.”
Nevertheless, Kirby said that United Airlines is responding by first retiring 21 aircraft, which will be a cash-positive maneuver in 2025. The airline would have had to spend over $100 million on engine overhauls on those assets, with the 21 aircraft retirements correlating from what the company has seen from the government.
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“Some of it is going to come out in government markets where we have seen less demand. And we are also going to cancel red-eye flights. Utilization flying is generally unprofitable at airlines even in good times, and it’s really unprofitable in bad times.”
Another weakened market is the transborder flying from Canada to the US, with the two countries’ top politicians engaging in a weeks-long word and tariff battle, with the latest reciprocal tariffs going into effect on March 12. Kirby concluded that, in addition, the airline adjusted its yield management system, taking more leisure bookings than government bookings.
Related United Airlines Made $3.5 Billion Last Year Flying More Passengers Than Ever United Airlines’ CEO remarked that 2024 was a strong year, with demand trends in 2025 continuing to accelerate.
Six-month U-turn
However, the biggest news of the conference was that Southwest Airlines broke its promises and will soon introduce basic economy tickets, remove the free bags perk for certain customers, and introduce expiring flight credits from May 28. The airline also confirmed that it made changes to the Rapid Rewards system, rewarding more points to its top-tier customers while reducing the points for lower-tier passengers.
On March 11, Bob Jordan, the President and CEO of Southwest Airlines, said that the changes were made to “meet current and future customer needs, attract new customer segments we don’t compete for today, and return to the levels of profitability” expected by management and shareholders. Yet removing free bags for customers goes against Jordan and the carrier’s promises made in September 2024.
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Then, during the company’s Investor Day, the airline introduced the ‘Southwest. Even Better.’ plan, which, despite incremental changes to parts of its business model, would have kept free bags for all passengers.
“Based on Southwest’s research, the Company believes that any change in the current policy that provides every customer two free checked bags would drive down demand and far outweigh any revenue gains created by imposing and collecting bag fees.”
However, that was the old Southwest Airlines, which was still amidst its proxy battle with Elliott Investment Management (Elliott). Following a peace resolution – perhaps a truce would be a more fitting word – agreement with the company, the carrier appointed six new directors, five of whom were proposed by Elliott, effective November 1, 2024.
Since then, Southwest Airlines has not only made the aforementioned changes but also announced its first-ever layoffs, affecting 1,750 office employees, to save up to $300 million in 2026.
The company ended 2024 with a net income of $465 million, with revenues climbing to $27.5 billion during the year.