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Southwest Airlines announced Thursday it canceled more than 10,000 flights in the first quarter due to the grounding of the Boeing 737 Max after two fatal accidents, a labor dispute with its mechanics and winter storms.
The increase in costs, due in part to strandings, more than offset the rise in ticket sales in the southwest, resulting in a 16% drop in first-quarter profits to $ 387 million.
The cancellations resulted in a sharp increase in spending by Southwest HQ in the first quarter. With its 34 Max jets idling at least towards the end of the summer, the airline predicted that the cost trend would worsen during the quarter from April to June, marking the start of the important travel season. vacation.
The first quarter results, however, exceeded Wall Street expectations and the airline said spring travel bookings were stronger than a year ago when sales were affected by the death of a passenger whose window had been broken by the debris of a broken engine.
Dallas-based Southwest shares edged up early in the session.
Southwest said the combination of canceled flights, the partial shutdown of the December-January government and weak demand for leisure travel had reduced first-quarter profits by $ 150 million.
The company said first-quarter adjusted earnings were 70 cents a share, nine cents better than analysts' forecasts polled by Zacks Investment Research.
Revenues increased 4% to $ 5.15 billion, slightly above analysts' expectations, but operating costs climbed 7%, mainly as a result of higher consumer spending. 'artwork.
President and CEO Gary Kelly said "our strong momentum early in the year has slowed down," but that Southwest has historically generated record revenues and strong profit margins.
Helene Becker, an analyst at Cowen Research, said she was concerned about the forecast of higher costs per seat for Southwest in the second quarter. She added that management needed to explain how it would improve its cost structure once the Boeing Max is back in the fleet.
Revenues for every one kilometer stolen seat increased 2.7% in the first quarter and Southwest is expecting an even bigger jump – between 5.5% and 7.5% – in the second quarter , when the airline will not face the overhang of the fatal engine of last year. explosion on a jet flying over Pennsylvania.
Head office costs are expected to rise from 10.5% to 12.5% in the second quarter. However, five points are attributable to Max 's grounding and the lower contributions of Southwest' s new Hawaii service, higher airport costs and the shift of some first – quarter expenses into the second.
Boeing Max represents less than 5% of Southwest's daily flights. Kelly said that the "vast majority" of customers was not affected by the grounding of the plane in mid-March, as a result of deadly accidents in Indonesia and Ethiopia. .
The airline has removed the Max from its schedule until August 5th and cancels dozens of flights a day.
According to Kelly, Southwest will return the aircraft to service once the Federal Aviation Administration has cleared it and the airline has completed all the necessary pilot training.
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