HOUSTON — Southwest Airlines will limit hiring and stop flying to four airports as it copes with weak financial results and delays in getting new planes from Boeing.
Both Southwest and American Airlines reported first-quarter losses Thursday. Demand for travel remains strong, including among business flyers, but airlines are dealing with higher labor costs, and delays in aircraft deliveries are limiting their ability to add more flights.
Southwest said it lost $231 million. CEO Robert Jordan said the airline was reacting quickly “to address our financial underperformance," including by slowing down hiring and asking employees to take time off.
The Dallas-based carrier said it expects to end this year with 2,000 fewer employees than it had at the start of the year.
Southwest will also stop flying to four airports: Cozumel, Mexico; Syracuse, New York; Bellingham, Washington; and George Bush Intercontinental Airport in Houston, where the airline’s major operation is at smaller Hobby Airport.
The closures will help the airline focus on more profitable locations and deploy a fleet of planes that will be smaller than it had planned. Southwest said it expects to get only 20 new 737 Max 8 jets from Boeing this year, down from the 46 it expected just a few weeks ago. It will offset some of the shortage by retiring fewer planes.
Boeing is struggling with slower production since a door plug blew out of an Alaska Airlines Max 9 in January, and that is frustrating its airline customers.
Dallas-based Southwest said that its loss, after excluding special items, was 36 cents per share. That was slightly worse than the loss of 34 cents per share that Wall Street expected.
Revenue rose to $6.33 billion, below analysts' forecast of $6.42 billion.
We reached out to Southwest and they sent us the following statement.
"We’ve made a tough decision to end Southwest service at four airports currently on our network as peak summer 2024 travel ends in early August. We no longer are accepting additional reservations beyond August 4, 2024, for travel in or out of Bellingham, Washington (BLI), Cozumel, Mexico (CZM), Houston Bush Intercontinental Airport (IAH), and Syracuse, New York (SYR).
This business decision centers around the best usage of our fleet in an environment requiring that we navigate around uncertainty in aircraft deliveries. We’re sharing this news now to support our Employees with other opportunities and to soften the impact of this change for Customers who had planned to travel with Southwest in or out of these airports on August 5 or beyond. We’re reaching out to all who are affected with their specific options and our heartfelt regret for the necessary change.
Our Planners continue the work of shaping our flight schedule to set up our network in a way that addresses demand, best utilizes our aircraft, and supports our workforce. We’re also taking steps to restore an industry-leading financial performance that enables us to best serve the millions of Customers who fly with us each week with our signature efficiency and reliability."
American Airlines also struggling
American said it lost $312 million as labor costs rose 18%, or nearly $600 million. The airline said it expects to return to profitability in the second quarter — a busier time for travel — and post earnings between $1.15 and $1.45 per share. Analysts expect $1.15 per share, according to a FactSet survey.
The first-quarter loss amounted to 34 cents per share excluding special items, which was worse than the loss of 27 cents per share forecast by analysts.
Revenue was $12.57 billion.
CEO Robert Isom said American is less impacted by Boeing's problems because the airline had already received hundreds of new planes in recent years. American has ordered Boeing Max 10s, a larger model that has not yet been certified by the Federal Aviation Administration, but those planes are not due to start showing up until 2028.
“If they don't get it together, we have also made sure that we're protected,” Isom told CNBC. He stopped short of saying American would switch Boeing orders to rival Airbus, saying only, “We'll take care of it.”
In premarket trading, Southwest shares were down 9% while American shares were up 3%.