US airlines face turbulence as uncertainty clouds 2025 outlook: Bernstein

Investing.com -- US airlines are grappling with a challenging start to 2025, as guidance downgrades and policy uncertainty weigh on investor sentiment, according to Bernstein.

"Earlier this week we took down estimates for the group to reflect uncertainty in the outlook tied to government spending and policy uncertainty," the firm stated.

After a strong finish to 2024, airlines are adjusting expectations for the first quarter. 

"There is a lot going on in the market, and while things are softer, it’s not clear that this softness is the beginning of the end or the beginning of a new round of belt tightening," Bernstein noted.

Among individual carriers, Delta Airlines (NYSE:DAL) delivered a disappointing outlook, with the firm citing "a lower load factor in 1Q" due to "overplayed" yield management. 

Meanwhile, American Airlines’ guidance fell below the lower end of its earlier range, a move Bernstein attributed to the airline’s "higher financial leverage." United Airlines maintained guidance but pointed to the low end of expectations.

Southwest Airlines (NYSE:LUV) stood out by raising its 2025 EBIT guidance to ~$1.7 billion, implying a 5.8% margin. 

However, Bernstein expressed caution, noting that "bag fees can help, but won’t be 100% incremental to the old plan."

Looking ahead, Bernstein remains optimistic despite near-term turbulence. " The speed and magnitude of the correction - combined with the benefits of more disciplined capacity, diverisfied revene, and the benefits of lower fuel that should come in later this year - makes us think the market has over-corrected to the downside," the firm stated. 

They added that improved capacity management in the summer could drive renewed interest in airline stocks. "We remain bullish the legacy carriers," Bernstein concluded.