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Bloomberg
US airlines tumbled after Southwest Airlines Co. cut its forecast for an industry revenue benchmark, citing stepped-up competition and a surprise drop in travel demand.
The weaker outlook is spurring investor fears that United Continental Holdings Inc.’s expansion plan will rekindle fare wars that have plagued the industry off and on since 2015. When the supply of seats outstrips demand, carriers generally have to cut ticket prices to fill planes—a boon for travelers and a threat to airline profits.
Southwest’s revision “screams United’s strategy negatively impacting the business in the near-term,†Helane Becker, an analyst at Cowen & Co., said. “We suspected there would be pressure from United’s strategy, but assumed it would come later in 2018.†Southwest’s revenue for each seat flown a mile, a gauge of pricing power, will be unchanged from a year earlier. That’s down from a previous projection of an increase of 1 percent to 2 percent at the airline, the largest US discounter.