DALLAS (AP) — Southwest Airlines lost $278 million in the first quarter, but said Thursday it expects to be profitable for the rest of the year due to growing travel demand.
The upbeat forecast echoed similar forecasts this month from other major US airlines. They say after being mostly locked down for two years during the pandemic, Americans are pulling out their credit cards to book flights.
However, not everything is clear for the airlines. They are faced with rising kerosene prices and a shortage of employees, especially pilots. Southwest said its workforce grew by 3,300 people in the quarter, and CEO Robert Jordan said the airline was still “intensely focused” on hiring and training workers ahead of the peak summer travel season. .
Southwest predicted second-quarter revenue will be 8% to 12% higher than the same quarter in 2019, even though it will operate 7% less passenger capacity. This is possible due to rising prices.
Southwest’s average rate in the first quarter was $159, up 32% from a year ago and 5% from the same period in 2019. Rates are expected to rise further, in part because more travelers book well in advance, when prices tend to be higher, and because airlines limit the number of seats they sell at the cheapest fares.
“Any time you see high demand, though, you’re going to see an increase in rates,” Jordan said on CNBC.
At the same time, Southwest hopes to mitigate the impact of rising fuel prices through its longstanding practice of hedging or buying options that pay when fuel rises but can backfire if prices fall. . The airline predicted that these blankets will earn 61 cents per gallon in the second quarter.
Rising COVID-19 cases nationwide this winter spoiled first quarter – Southwest hit by high number of sick employee calls and canceled more than 6,300 flights in January alone , according to figures from the tracking service FlightAware. But Jordan said the airline was back in the black in March.
“Based on current plans and strong and expected bookings, we continue to expect to be solidly profitable for the last three quarters of this year and for the full year 2022,” Jordan said in a prepared statement.
Savanthi Syth, airlines analyst for Raymond James & Associates, said Southwest’s forecast implied second-quarter earnings of $1.10 per share, well above Wall Street’s average forecast of 40 cents per share. . She said Southwest’s outlook exceeded her most optimistic expectations, which had already been prompted by upbeat comments from other airlines.
The country’s four largest carriers — American, Delta, United and Southwest — lost more than $4.2 billion combined in the first quarter, but all expressed high hopes for a booming summer season and full planes. Delta reported record bookings, and the CEOs of American and United said they had never seen such strong travel demand.
Southwest’s loss in the first quarter compared with a profit of $116 million a year earlier, when Southwest was still receiving federal pandemic assistance to help cover labor costs.
Excluding special charges, the Dallas carrier lost 32 cents per share. Revenue was $4.69 billion, more than double a year ago and 91% of revenue in the same quarter of 2019, before the pandemic.
The loss was slightly larger than analysts had expected. Analysts predicted a loss of 30 cents per share on revenue of $4.67 billion, according to a FactSet survey.
Shares of Southwest Airlines Co. rose nearly 3% shortly after the market opened on Thursday.
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