Will the Prolonged Government Shutdown Hamper Airlines' Q4 Results?

The longest ever federal government shutdown in U.S. history finally ended last month, after President Donald Trump signed a spending bill. The 43-day shutdown caused financial stress for federal workers who went without paychecks, stranded scores of travelers at airports, among other difficulties.

The airline industry was among the worst-affected ones, with multiple flights being canceled, coupled with staffing shortages and adverse weather conditions. The extended government shutdown left air traffic controllers unpaid and placed substantial strain on air traffic control operations. We would like to remind investors that during the shutdown, the Federal Aviation Administration (“FAA”) had announced to reduce flight capacity at 40 major U.S. airports.

Although the shutdown ending marks a welcome sign for airlines, the loss incurred during that time span has led to airlines like Delta Air Lines DAL, Southwest Airlines Co. (LUV) and Alaska Air Group, Inc. ALK) issuing disappointing guidance.

Each of the three stocks mentioned above currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Apart from shutdown effects, fuel price fluctuations also play a major role in shaping airlines’ bottom-line growth. This is because fuel expenses are a significant input cost for the aviation industry.

Given this backdrop, let’s delve deeper to discuss the updated fourth-quarter 2025 and ful year 2025 guidance of the aforementioned stocks.

Delta Air Lines

At the Morgan Stanley Global Consumer & Retail Conference held on Dec. 3, 2025, Delta unveiled that the government shutdown is anticipated to reduce the company’s December-quarter pre-tax profitability by almost $200 million, or about 25 cents per share. This is due to the softer travel demand witnessed in November due to the government shutdown.

On the greener side, demand remains healthy for the December quarter, with strong trends continuing into early 2026. Travel bookings have recovered to initial expectations.

Southwest Airlines

This Dallas, TX-based passenger airline company revealed its updated expectations for full-year 2025 earnings before interest and taxes, excluding special items (EBIT).

Citing issues related to lower revenues owing to the government shutdown and the impact of higher fuel prices, LUV now anticipates its full-year 2025 EBIT guidance to be around $500 million. This marks a downside from the previous guided range of $600-$800 million.

However, bookings have returned to previous expectations post the temporary decline in demand related to the shutdown.

Alaska Air Group

ALK cited several headwinds that led to an impact of nearly 55-60 cents per share, hurting its fourth quarter. This includes an internal IT and cloud service provider outage (25 cents), lost revenue owing to the government shutdown (15 cents), higher fuel costs (15 cents) and a higher book tax rate for the fourth quarter.

ALK now anticipates its fourth-quarter 2025 adjusted earnings per share to be around 10 cents per share, down from the prior view of 40 cents per share. The Zacks Consensus Estimate is currently pegged at 42 cents per share.

Fourth-quarter unit revenues or revenue per available seat miles are now expected to be up 1% compared with the prior expectation to be up low single digits on a year-over-year basis. Fourth-quarter capacity (measured in average seat miles)is now expected to be up 2% compared with the prior guided range of up 2%-3% on a year-over-year basis.

Consolidated operating costs per available seat mile (excluding fuel and special items)for the fourth quarter are now anticipated to be up 3% compared with the prior expectation to increase by low single-digits year over year.

ALK has been witnessing high West Coast refining margins due to continued supply disruptions. This has led to an increase in fuel cost expectation to $2.65 per gallon from the prior range of $2.50–$2.60 per gallon.

The government shutdown, which started in October, drove FAA-mandated flight reductions, which led to almost 600 cancelations across ALK, impacting nearly 40,000 guests. Although operations resumed immediately after the government reopening, the disruption and lost revenue are anticipated to hurt Alaska Air’s earnings by almost 15 cents for the fourth quarter.

Airline Industry Price Performance

The Zacks Airline industry has risen 10.7% in the past month, outperforming 5.4% growth of the broader Zacks Transportation sector and the 1.2% rise of the Zacks S&P 500 Composite.

One-Month Price Comparison

Our Take

While the loss borne by the airlines during the government shutdown has forced them to reduce their fourth-quarter 2025 expectations, immediate service resumption post the shutdown end has helped them enjoy strong travel demand, thanks mainly to the Thanksgiving travel period. With these encouraging travel bookings, we keenly await fourth-quarter 2025 earnings results of airline companies, most of which are expected to be released next month.

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This article originally published on Zacks Investment Research (zacks.com).

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