In its third-quarter (Q3) report released Thursday, Southwest Airlines revealed a 30% decrease in profits, attributing the decline to mounting labor and fuel expenses. The budget carrier also disclosed its anticipation of augmented aircraft deliveries from Boeing in the forthcoming year. Consequently, premarket trading saw a 4% dip in the company’s shares.
Earnings for U.S. airlines experienced a considerable squeeze in the July-September period, primarily due to an upswing in jet fuel prices, stemming from constrictions in crude oil supplies. Last month, Southwest Airlines voiced apprehensions regarding escalating fuel expenses and subdued leisure bookings in August, citing seasonal trends. The company’s overall expenses surged by 10% to $6.41 billion in the quarter, owing to amplified labor rates across all employee workgroups.
CEO Bob Jordan announced Southwest’s deliberate slowdown in available seat miles growth rate, a strategic move aimed at assimilating present capacity and fine-tuning schedules in alignment with current travel trends. Analysts have advocated for airlines to curtail capacity in order to uphold their pricing authority amidst a waning demand for domestic travel.
Southwest projects a 9-11% reduction in fourth-quarter operating revenue per available seat mile, a critical gauge of pricing leverage, in comparison to the previous year. Nonetheless, the company anticipates achieving unprecedented operating revenue in the final quarter. On the whole, Southwest foresees a 15% surge in capacity in the current quarter, contingent on operational disruptions witnessed last December.
A prominent client of Boeing’s MAX series, Southwest Airlines expects an influx of 85 737-8 jet deliveries this year, surpassing its initial projection of 70, despite quality concerns flagged by the aircraft manufacturer.
For the third quarter, Southwest reported a profit of $193 million, or $0.31 per share, a drop from $277 million, or $0.44 per share, in the corresponding period the prior year. The airline’s total operating revenue, however, experienced a notable uptick, growing by 4.9% to $6.53 billion.
In conclusion, Southwest Airlines’ Q3 profits, while experiencing a 30% decline, underscore the airline’s resilience in the face of escalating costs and its unwavering commitment to navigating the challenges of the aviation industry.
Source: Reuters
