Southwest Airlines Warns of Delta Variant Impact on Business
Southwest Airlines issued a warning this week, revealing that customers are booking fewer flights and canceling their booked trips more frequently this month. As a result, the airline has adjusted its third-quarter earnings forecast, predicting a decline of 15-20% compared to August 2019. This adjusted forecast represents a 12% reduction from initial projections, which were already lower than the figures from two years ago.
The airline, which reported earnings in the green for July, expects a 15-25% decrease in earnings in September compared to the same month in 2019. However, the demand for Labor Day travel remains high, according to the airline's report.
Southwest's shares remained unchanged on Wednesday.
Southwest's warning marks a significant shift in its outlook, which had projected profits for the third and fourth quarters due to strong booking trends for vacation travel. Southwest President Tom Nealon, who had previously stated that they hadn't noticed any impacts from the Delta variant, now acknowledges its challenges.
Highly transmissible COVID-19 variants have caused widespread disruptions in the aviation sector. According to CNN's Business Recovery Dashboard, domestic air travel, measured by tickets issued by US travel agencies and online booking platforms, was only 3% below the 2019 level as of July 3. However, domestic air travel has since slowed down, with a 22% decrease by July 23 compared to the same period in 2019.
Additional Insights
- Despite not directly linking the Delta variant to their third-quarter challenges, the broader context of operational challenges, cost-cutting measures, and market conditions suggests that Southwest Airlines is facing significant hurdles.
- The grounding of the Boeing 737 MAX and delays in aircraft deliveries from Boeing have affected Southwest's operations and financial performance in the past.
- Southwest has implemented cost-cutting measures, including the suspension of services at several airports and staff reductions, to mitigate financial losses.
- Slower demand and decreased revenue growth have negatively impacted Southwest's financial performance.
