Southwest Airlines (LUV) has once again rattled shareholders with grim news, revealing a second-quarter revenue outlook that falls short of market expectations.
The airline announced on June 26 that it anticipates a dip in revenue per available seat mile (RASM) between 4% and 4.5%, blaming significant shifts in travel booking patterns.
Back in April, Southwest disclosed a surprising loss of $231 million, or 39 cents per share, for the first quarter of 2024.
This came alongside a modest 4% growth in capacity, missing the 6% target set the previous year. Now, the airline warns of a 7.5% increase in unit expenses, including fuel costs.
Southwest explained, “The reduction in the Company’s RASM expectations was driven primarily by complexities in adapting its revenue management to current booking patterns in this dynamic environment,” in a regulatory filing.
The announcement sent Southwest’s stock tumbling over 4% in pre-market trading, though it managed a slight recovery to $28.24 by afternoon.
The business remains “intensely focused on improving its financial results,” despite laying off 2,000 employees and ceasing operations at four airports: Syracuse in New York, Bellingham in Washington, Houston’s George Bush International, and Cozumel in Mexico.
Adding to its woes, Southwest faces setbacks from the Boeing (BA) investigation, which has slowed production and deliveries.
The airline now expects only 20 new planes instead of the anticipated 46, disrupting plans for profitable routes.
CEO Bob Jordan stated, “The recent news from Boeing regarding further aircraft delivery delays presents significant challenges for both 2024 and 2025.”
Elliott Management, a major stakeholder led by Paul Singer, has called for a leadership shake-up, pushing for the replacement of Jordan and board chairman Gary Kelly.
Despite these pressures, Southwest stands by its current leadership.
“The Southwest Board of Directors is confident in our CEO and management’s ability to execute against the company’s strategic plan to drive lon-term value for all shareholders,” a spokesperson asserted.
Southwest Airlines is navigating a stormy sky, grappling with unprofitable quarters and external pressures.
The road to recovery remains turbulent, but the company is determined to chart a course toward financial stability and customer satisfaction.
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