Southwest Airlines cuts revenue forecast on $60 million government shutdown hit, shares sink

Key Points
  • Southwest says the partial government shutdown cost it $60 million in revenue.
  • The airline last month forecast a $10 million to $15 million hit.
  • The airline trims its revenue outlook for the first quarter of 2019.
A Southwest Airlines jet leaves Midway Airport on in Chicago, Illinois.
Scott Olson | Getty Images

Southwest Airlines shares slipped Wednesday after the Dallas-based airline trimmed its revenue outlook for the quarter, citing a $60 million hit from the partial government shutdown.

In the March quarter, the carrier expects its revenue per available seat mile, a key industry metric of how much airlines are making for each seat they fly a mile, to increase 3 to 4 percent in the first quarter from the same period of 2018. The airline previously said it expected revenue to increase as much as 5 percent in the quarter.

Southwest shares slid more than 4 percent in afternoon trading Wednesday. Delta Air LinesUnited Airlines and American Airlines were each down less than 1 percent.

The 35-day government shutdown, which ended late last month, stalled the launch of new jets and routes, including Southwest's long-awaited service to Hawaii.

It also meant lost revenue with government workers and contractors not traveling during the impasse.

Southwest last month estimated the shutdown cost it $10 million to $15 million in revenue in January.

"Since then, the company has continued to experience softness in passenger demand and bookings as a result of the government shutdown," Southwest said in a filing Wednesday, forecasting the $60 million hit. The amount is small considering its overall revenue. For example, in the fourth quarter, Southwest generated a record $5.7 billion. Analysts expect Southwest to post first-quarter revenue of $5.35 billion, according to FactSet.

The airline added that it has seen strong last-minute booking demand and fares so far in the first quarter.

Goldman Sachs downgraded the airline's stock on Wednesday to a sell rating from neutral, saying it would be too costly and that it would have to offer steep discounts to get travelers on board because of the launch's delay.