Southwest Airlines shares tumble as costs rise, unit revenue slips

Southwest Airlines shares slid about 9% in morning buying and selling Thursday after the airline reported decrease unit revenue and better costs for the second quarter — and mentioned the tendencies are more likely to proceed this quarter.

The Dallas-based airline’s second-quarter unit revenue dropped 8.3% from a 12 months earlier, Southwest mentioned, citing a coverage change final summer season that eliminated expiration dates from Covid pandemic journey credit.

The service mentioned it expects unit revenue to fall as a lot as 7% through the third quarter on capability up 12% from a 12 months earlier. It blamed “challenging comparisons from the pent-up travel demand surge in 2022, and higher than seasonally-normal growth.”

Airlines have loved document revenue in latest months, however airfare in the U.S. has dropped from 2022, in accordance with the newest inflation learn.

Southwest mentioned it’s “revamping” 2024 schedules to replicate altering buyer demand as enterprise journey revenue recovers however lags pre-pandemic ranges.

“We are working to align our network, fleet plans, and staffing to better reflect the current business environment,” CEO Bob Jordan mentioned in an earnings launch.

Jordan instructed CNBC’s Phil LeBeau on Thursday that the revamp may imply larger drops in capability than regular on Mondays and Tuesdays, when enterprise journey demand would usually choose up. The airline additionally plans to chop some short-haul flights in favor of longer-haul ones as nicely as cut back very early and really late departures.

Here’s how Southwest carried out within the second quarter, in contrast with Wall Street expectations in accordance with Refinitiv consensus estimates:

• Adjusted earnings per share: $1.09 vs. an anticipated $1.10
• Total revenue: $7.04 billion vs. an anticipated $6.98 billion

The airline’s internet earnings fell to $683 million, or $1.08 a share, down 10% from $760 million, or $1.20 per share, through the second quarter of 2022.

Revenue got here in at a document $7.04 billion for the three months ended June 30, forward of analyst expectations and up 4.6% from the identical quarter final 12 months.

Meanwhile, working bills rose greater than 12% from a 12 months earlier. Stripping out gasoline, bills had been up 7.5%, on the greater finish of the corporate’s earlier price steerage due partly to deliberate wage will increase tied to open labor agreements.

Southwest executives will maintain an analyst and media name at 12:30 ET, after they’re anticipated to face questions on development plans and progress on enhancing know-how to keep away from a repeat of the vacation meltdown in December. They are additionally probably to offer an replace on what has been tough labor talks with pilots.