What caused LUV's Q1 earnings to fall short of forecasts?

Southwest Airlines' (LUV) Q1 earnings fell short of forecasts due to a combination of factors:

1. **Unit Revenue Growth Forecast Cut**: Southwest Airlines reduced its unit revenue growth forecast for the first quarter, expecting a range of 2% to 4% increase compared to the previous forecast of 5% to 7%. This adjustment reflects a more cautious outlook on ticket pricing power and passenger yield.
2. **Economic Concerns and Tariff Impact**: The airline industry, including Southwest, is sensitive to economic conditions and tariff policies. Concerns over discretionary spending, influenced by high interest rates, inflation, and government spending uncertainties, have impacted travel demand. This broader economic context contributes to the revised Q1 forecasts.
3. **Discretionary Spending Concerns**: Southwest's decision to introduce bag fees might signal a strategic shift to boost earnings, but it could also be perceived negatively by investors, especially if it affects customer loyalty and overall demand.

In summary, Southwest Airlines' Q1 earnings fell short due to a combination of reduced unit revenue growth forecasts, economic concerns, and potential impacts of tariff policies, along with discretionary spending concerns and strategic shifts like introducing bag fees.