A Southwest Airlines flight is serviced at the gate at Fort Lauderdale-Hollywood International Airport on May 18, 2024, in Fort Lauderdale, Florida.
Gary Hershorn Corbis News | Getty Images
Southwest Airlines there is a forecast of a potential decrease in unit revenue for the third quarter as the oversupplied US market has forced airlines to discount tickets during what is usually the most lucrative period of the year.
Southwest said unit revenue for the current quarter could fall as much as 2% from last year and non-fuel costs could rise as much as 13%, with higher costs at the airline through the end of 2024.
Shares of Southwest fell more than 6% in premarket trading Thursday.
Here’s how Southwest performed in the second quarter compared to Wall Street expectations, according to consensus estimates from LSEG:
- Earnings per share: 58 cents adjusted vs. the expected 51 cents
- result: $7.35 billion vs $7.32 billion expected
The Dallas-based airline said second-quarter revenue rose 4.5% from a year earlier to $7.35 billion, a record, but profit fell more than 46% to $367 million, or 58 cents a share. Revenue per available seat mile, a measure of airlines’ pricing power, fell 3.8%, roughly in line with the carrier’s forecast of a decline last month.
Southwest reported adjusted earnings per share of 58 cents a share, above analysts’ expectations.
“Our second quarter performance was impacted by external and internal factors and fell short of what we believed to be possible,” CEO Bob Jordan said in an earnings release.
Southwest said that there are negotiations for compensation from Boeing as the only aircraft supplier struggling to deliver aircraft on time due to security and manufacturing crises. Southwest said it expects only 20 deliveries from Boeing this year — less than half of its previous forecast.
The airline is in the midst of an overhaul as pressure mounts from investors to boost earnings. Elliott Investment Management announced a nearly $2 billion stake in the carrier last month and called for a change in leadership.
Earlier Thursday, Southwest announced it would scrap its open seating plan and offer some seats on Boeing planes with extra legroom and add overnight flights, the biggest change to its business model in more than five decades of aviation. The changes, which begin next year, will make Southwest more like competing network carriers.
“We are taking significant and deliberate steps to mitigate short-term revenue challenges and implement long-term transformation initiatives designed to drive meaningful top-line and bottom-line growth,” Jordan said in the release.
Delta Air Lines and United Airlines executives earlier this month said they hope to see US capacity begin to moderate in August, which could lead to higher rates.
