Shares of U.S. airlines fell on Wednesday, dragging on the broader market, after Southwest Airlines Co announced plans to increase capacity as much as 8 percent in 2015.

Investors tend to be bullish on airline stocks on announcements of capacity cuts, which reduce costs, and shy away from capacity increases, which can put pressure on airline ticket prices if seats are going empty.

Analysts said that investors are worried that capacity increases will hurt Southwest and its rivals.

"Understandably, investors are questioning if this signals the end of the era of industry capacity discipline," Raymond James analyst Savanthi Syth wrote in a research note.

Syth lowered her 2015 and 2016 earnings estimates for Southwest, citing the higher domestic capacity as well as rising fuel prices and lower expectations for U.S. gross domestic product.

The analyst also noted Southwest's expectation for lower passenger unit revenue in the second quarter.

Cowan and Co analyst Helane Becker said a report that American Airlines has vowed to match low airline ticket prices also added to investors' worries.

The NYSE ARCA Airline index was down 4 percent, on track for its worst day since late January. By 11:30 a.m. Minnesota time, trading volume for the sector was almost double its 50-day moving average.

Southwest shares led the decline with a 7.7 percent drop, marking their worst day since Oct. 3, 2011. Trading was brisk, with about almost three times its 10-day average volume by 12:35

Order flow in Southwest Airlines' options was bearish, with puts volume at 30,000, or 29 times expected, according to Trade Alert data.

United Continental Holdings Inc. shares were off 7.1 percent, also in heavy trading, and Delta Air Lines Inc.  was down 5.1 percent.

American Airlines Group Inc shares fell 6.9 percent, while Skywest Inc was down 5.3 percent.         

JetBlue Airways Corp fell 5.9 percent, Spirit Airlines was off 6.5 percent, and Hawaiian Holdings Inc
 was down 4.9 percent.
The Standard & Poor's Industrial sector weighed the most on the S&P 500 benchmark index, with airlines the worst percentage losers.