A Southwest Airlines passenger plane lands at Chicago Midway International Airport on December 28, 2022 in Chicago, Illinois.
Kamil Krzaczynski | AFP | Getty Images
Southwest Airlines said Thursday it plans to slow capacity growth next year, citing weaker travel demand as booking patterns shift back to pre-Covid norms.
Southwest will increase its flight growth by 10% to 12% year-over-year in the first quarter of 2024, down from a previous forecast of up to 16%, Southwest said in an earnings release. Growth of between 6 and 8 percent is expected for the full year 2024, it said.
Airlines have expanded their flight offerings this year as travelers have returned to more traditional bookings and travel during peak holiday periods or public holidays. This capacity expansion has resulted in lower airfares.
Last year, executives cited high off-peak travel volumes, coupled with a shortage of planes and other challenges that led to high airfares.
Here’s how Southwest performed in the third quarter compared to Wall Street’s expectations, according to consensus estimates from LSEG, formerly known as Refinitiv:
- Adjusted earnings per share: 38 cents versus expected 38 cents
- Total sales: $6.53 billion versus expected $6.57 billion
Southwest forecast unit revenue, the amount an airline makes for each seat it flies per mile, would fall 9% to 11% in the fourth quarter from a year ago, with capacity increasing about 21%.
“As we head into 2024, we are slowing down our development [available seat mile growth] “We want to adjust rates to take advantage of current capacity, mature developing markets and align schedules with current travel patterns,” CEO Bob Jordan said in a quarterly earnings release.
Southwest’s third-quarter net income fell 30% from a year ago to $193 million, or 31 cents per share, while revenue rose 4.9% to $6.53 billion. Adjusted for the impact of employment contract adjustments and other one-time items, the company earned 38 cents per share.
Ultra-low-cost carrier Spirit Airlines also said Thursday it was reviewing its growth plans after posting a loss of $157.6 million in the third quarter, compared with a loss of $36.4 million -dollars in the previous year. The company forecast negative margins for the final three months of the year, citing weaker demand even for year-end holidays.
“Weaker demand for our product and discounted rates in our markets resulted in disappointing third quarter 2023 results,” CEO Ted Christie said in an earnings release. “We continue to see discounted rates for travel booked in the lead-up to Thanksgiving.”
(JetBlue Airways is trying to acquire Spirit, although the Justice Department has filed a lawsuit to block the deal. The trial is scheduled to begin next week.)
Fellow discount retailer Frontier Airlines posted a third-quarter loss of $32 million, compared with a profit of $31 million in the same period last year. This carrier also forecast negative margins for the fourth quarter.
Shares of Southwest lost less than 1% in afternoon trading, while Spirit fell more than 5% and Frontier rose more than 4%.
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Source : www.cnbc.com