The largest U.S. domestic carrier said August bookings were at the lower end of its expectations, in part due to seasonal trends, but maintained that overall leisure demand and yields remain healthy.
Shares of Southwest fell about 4% premarket, before recovering some losses to trade about flat after markets opened.
The forecast comes as early signs emerge of domestic travel demand weakening, with inflationary pressures hurting consumers even as carriers hand out costly contracts to retain workers.
Southwest, United Airlines (UAL.O) and Alaska Air Group (ALK.N) also warned of higher fuel costs in the current quarter as crude oil prices rose for the third month in a row in August, amid signs of tightening supply.
In a regulatory filing, United said jet fuel prices have climbed over 20% since mid-July. The carrier did not outline any impact to current-quarter profit but is set to present at a conference later on Wednesday.
Southwest said it continues to forecast a "solid (third-quarter) profit", but trimmed its expectations for revenue per available seat mile - a proxy for pricing power - to a 5% to 7% fall, compared with a 3% to 7% fall forecast earlier.
Alaska Air expects quarterly adjusted pre-tax margin of 10% to 12%, lower than its prior expectation of 14% to 16%.
U.S. airlines do not generally hedge against fuel costs, making them vulnerable to price swings.
"The relatively quick up move in fuel has given the industry little time to respond through fares," Citi Research analyst Stephen Trent said in a note.
