Southwest Airlines warns economic uncertainty dampens its efforts to reach return targets

Up-gauging of its fleet and near-term economic pressures are dampening Southwest Airlines' expectations for the rest of the year as executives believe US budget cuts, a looming deficit battle and rising taxes have resulted in an economic climate in the US that was worse than the carrier expected.

Southwest's continuing integration with AirTran is also making its performance for the rest of the year difficult to predict as new markets spool up and work is continuing to optimise the combined networks. The carrier is getting some push-back related to its core performance; but still believes its same store sales are performing up to expectations.

Given its weaker than expected performance during 1H2013, Southwest is beginning to issue warnings that hitting its ambitious 15% return on invested capital (ROIC) for 2013 is growing unlikely after the carrier missed that target in 2012.