By Alison Sider
Southwest Airlines is pulling out of some airports and cutting costs as it grapples with lackluster earnings and as delays of new Boeing planes dim its prospects for the year.
Southwest reported a quarterly loss of $231 million, or 39 cents per share. Its adjusted loss of 36 cents per share was slightly worse than the 34 cents analysts had anticipated.
The airline reported record first-quarter operating revenue of $6.3 billion, fueled by strong travel demand. But last minute leisure bookings didn't meet the airline's expectations, and some of the airline's newer markets underperformed.
The results are a contrast to rivals including Delta Air Lines, which posted a first-quarter profit, and United Airlines, which said it would have earned money in the first part of the year if not for the grounding of the Boeing 737 MAX 9 after the midflight blowout of a door plug in January.
The fallout from that incident for Boeing and its customers has continued to ripple. Southwest, which flies only Boeing planes, is one of the hardest-hit airlines.
The jet maker, under pressure to get a handle on quality problems, is building fewer of its 737 MAX jets -- something that has complicated plans for several of its airline customers. Boeing also faces heightened inspections and regulatory scrutiny after the near catastrophe on the Alaska Airlines flight in January.
Southwest said it now expects to receive just 20 new Boeing planes this year -- less than half the number it had been expecting as recently as March and well below the 79 total MAX deliveries it had expected before that. Regulatory approval for a smaller version of the MAX, which Southwest has been waiting for, remains up in the air.
The delays will thwart Southwest's growth ambitions this year, the company said, damping revenue and leaving it on the hook for higher costs.
"We are focused on controlling what we can control and have already taken swift action to address our financial underperformance and adjust for revised aircraft delivery expectations," said Chief Executive Bob Jordan.
Southwest still expects a strong summer, anticipating revenue hitting a quarterly record in the second three months of the year. But the airline is planning schedule reductions after the peak travel period subsides, shaving off some of its planned capacity expansion.
The carrier said it is taking steps to reduce costs, including limiting hiring and offering voluntary time off programs to employees. It expects to end this year with 2,000 fewer employees than it had at the end of 2023.
The airline is closing down its operations at four airports in August, including some it entered during the Covid-19 pandemic as part of an aggressive strategy to chase new revenue: Cozumel International Airport in Mexico; Bellingham, Wash.; Syracuse, N.Y.; and Houston's George Bush Intercontinental Airport.
Southwest rarely exits airports and hasn't done so since 2019, when it dropped Newark, N.J., from its route map during a previous grounding of the MAX. It said it also plans to "significantly restructure" other markets, including reducing flying in Atlanta and Chicago's O'Hare International Airport.
Southwest said it is studying changes it might make to better reflect customer preferences for onboard seating and its cabins. Rivals have benefited from opportunities to upsell customers on more premium seating options -- something Southwest has missed out on.
Write to Alison Sider at alison.sider@wsj.com
(END) Dow Jones Newswires
April 25, 2024 06:45 ET (10:45 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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