Southwest Airlines Boeing 737-700 aircraft as seen landing at dusk time at Ronald Reagan Washington National Airport DCA in Arlington County, Virginia
Southwest Airlines Boeing 737-700 aircraft as seen landing at dusk time at Ronald Reagan Washington National Airport DCA in Arlington County, Virginia over the Potomac River in the United States of America flying over water and buildings.
Nicolas Economou | Nurphoto | Getty Images
Southwest Airlines shares slid more than 6% in premarket trading Thursday after the airline reported lower unit revenue and higher costs during the second quarter — and said the trends are likely to continue this quarter.
The Dallas-based airline’s second-quarter unit revenue dropped 8.3% from a year earlier, Southwest said, citing a policy change last summer that removed expiration dates from pandemic travel credits.
The carrier said it expects unit revenue to fall as much as 7% during the third quarter on capacity up 12% from a year earlier. It blamed “challenging comparisons from the pent-up travel demand surge in 2022, and higher than seasonally-normal growth.”
Airlines have enjoyed record revenue in recent months, but airfare in the U.S. has dropped from 2022, according to the latest inflation read.
Southwest said it is “revamping” 2024 schedules to reflect changing customer travel patterns, noting that while business revenue is recovering it’s not back to pre-pandemic levels.
“We are working to align our network, fleet plans, and staffing to better reflect the current business environment,” CEO Bob Jordan said in an earnings release.
Here’s how Southwest performed in the second quarter, compared with Wall Street expectations according to Refinitiv consensus estimates:
- Adjusted earnings per share: $1.09 vs. an expected $1.10
- Total revenue: $7.04 billion vs. an expected $6.98 billion
The airline’s net income fell to $683 million, or $1.08 a share, down 10% from $760 million, or $1.20 per share, during the second quarter of 2022.
Revenue came in at a record $7.04 billion for the three months ended June 30, ahead of analyst expectations and up 4.6% from the same quarter last year.
Meanwhile, operating expenses rose more than 12% from a year earlier. Stripping out fuel, expenses were up 7.5%, at the higher end of the company’s previous cost guidance due in part to planned wage increases tied to open labor agreements.
Southwest executives will hold an analyst and media call at 12:30 ET, when they’re expected to face questions about growth plans and progress on improving technology to avoid a repeat of the holiday meltdown. They are also likely to provide an update on what has been difficult labor talks with pilots.
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