Picture this: you finally book that long-overdue vacation, you’re packed, excited, and then… the government shuts down for over forty days and the entire airline system basically grinds to a halt. Sounds like a bad dream, right? Unfortunately for millions of travelers (and for one very big airline), that nightmare just became 2025 reality.
On Friday morning, Southwest Airlines dropped a bombshell that sent its stock sliding before the opening bell: the carrier is now expecting only around $500 million in earnings before interest and taxes for the full year 2025. That’s a brutal haircut from the $600 million to $800 million range they were guiding just weeks ago.
What Went Wrong for the King of Low-Cost Flying?
Let’s be honest—Southwest has spent years building a reputation as the scrappy, reliable, “bags fly free” airline that somehow keeps making money when everyone else is bleeding cash. So when they come out and basically say “yeah, we’re going to miss our lowest profit expectation in years,” people sit up and listen.
The two big culprits? The historic government shutdown and stubbornly high fuel prices. And honestly, the shutdown hit harder than most of us probably realized at the time.
The Shutdown Nobody Saw Coming
Most of us watched the nightly news, saw federal workers lining up at food banks, and figured “well, at least the airports are still running.” Turns out, not really.
Air traffic controllers—already stretched thin before everything went sideways—were forced to work without pay for over forty days. Morale tanked. Sick-outs spiked. The FAA eventually ordered airlines to cut flights at major hubs just to keep the system from completely collapsing.
“Following the temporary decline in demand related to the shutdown, bookings have returned to previous expectations.”
– Southwest Airlines securities filing, December 2025
That sentence sounds calm and corporate, but read between the lines: people simply stopped flying. Business travelers canceled trips. Families postponed holiday plans. Leisure bookings evaporated almost overnight. And Southwest, with its heavy reliance on domestic point-to-point routes (exactly the ones federal employees and contractors use), took it right on the chin.
Fuel Prices Refusing to Cooperate
If the shutdown was the punch to the gut, fuel prices were the kick while they were down. Crude has been bouncing around like it’s 2022 all over again, and hedging or no hedging, Southwest’s massive fleet of 737s drinks jet fuel like it’s going out of style.
Add it all up and you get hundreds of millions in unexpected costs at the exact moment revenue was already tanking. Ouch.
Delta Felt It Too—But Maybe Not Quite as Hard
Earlier this week, Delta came out and said the shutdown cost them a clean $200 million in profit. That’s real money, but on Delta’s scale it’s more like a very expensive paper cut. They also made a point of saying demand heading into 2026 looks “strong.” Translation: we’re basically fine, thanks for asking.
Southwest didn’t go that far. They said bookings have “returned to previous expectations,” which in airline-speak is considerably more cautious than “strong.” Investors noticed.
The Bigger Picture for Airline Investors
Look, I’ve been watching airline stocks for longer than I care to admit, and if there’s one thing I’ve learned it’s this: never fall in love with an airline. They’re incredible businesses when times are good, and absolute train wrecks when one little thing goes wrong. And a 40-day government shutdown plus $80 oil? That’s more than one little thing.
- Southwest’s famous fuel hedging program helped for years, but those contracts are mostly gone now.
- They still don’t charge bag fees (a competitive advantage that suddenly becomes a margin killer when revenue collapses).
- Their network is heavily domestic—great when corporations are spending, terrible when Uncle Sam tells everyone to stay home.
Put it all together and you’ve got a perfect storm for the Dallas-based carrier.
Reasons to Stay Calm (Yes, Really)
Before we all start writing Southwest’s obituary, let’s breathe for a second.
First, the shutdown is over. Federal workers are getting paid again. Controllers are coming back to work. The FAA is slowly lifting capacity restrictions. Life is returning to normal—or at least airline normal.
Second, Southwest has been through hell before. Remember 2022’s Christmas meltdown? They lost a billion dollars, revamped their entire operation, and came out swinging. This company knows how to take a punch.
Third, pent-up demand is a real thing. People have vacations to take, weddings to attend, family to visit. All those trips that got canceled or postponed? A lot of them are going to get rebooked in 2026.
What Should Travelers Watch For?
If you’ve got Southwest flights booked for the next few months, here’s what I’m keeping an eye on:
- Possible schedule thinning in early 2026 as they finish rebuilding buffers
- Aggressive fare sales to win back leisure travelers (good news for your wallet)
- Continued operational caution—don’t be surprised by conservative load factors for a quarter or two
On the flip side, Rapid Rewards points might be an absolute steal if they flood the market with award seats to stimulate demand. I’ve seen it before.
The Bottom Line
Southwest Airlines just took a flamethrower to its 2025 guidance, and nobody can blame the government shutdown alone. This was a one-two punch of lost demand and higher costs that exposed some real vulnerabilities in their model.
But—and this is a big but—they’re telling us the worst is already behind them. Bookings are back. The system is healing. Fuel might even cooperate if geopolitics calms down.
For investors, it’s probably a “watch and wait” situation. For travelers, it might actually mean some screaming deals in the coming months.
Either way, one thing is crystal clear: in the airline business, smooth skies are never guaranteed. And when Washington decides to throw a six-week tantrum, even the toughest carriers feel the pain.
Here’s hoping 2026 is a hell of a lot calmer—for all of us.
