Southwest Posts Solid Profit – Travel Bounces Back

Southwest Airlines Co Thursday forecasted “solid” profit for current quarter. It said that quarterly revenue would exceed pre-pandemic levels due to surging travel demand. This sent its shares higher.

According to the company, it made a profit in March and anticipates being “solidly profitable” for this year, despite higher fuel costs and labor costs.

In morning trade, Southwest shares rose 2.2% to $46.97

Due to staff shortages and flight cancellations, the airline suffered an adjusted loss that was larger than expected in its first quarter. In January, the airline cancelled more than 5,600 flights. Around 10% of its workforce had contracted the coronavirus.

Southwest reported that a sharp rise in travel bookings during March helped it lift its monthly revenue to 2019 levels, which was the highest level since the outbreak of the pandemic. It also stated that April saw strong leisure bookings for summer and spring travel.

It anticipates a 8% to 12% increase in revenue for the quarter through June, compared with the same period in 2019. The quarter’s capacity is expected to decrease by 7%.

However, the Texas-based company plans to increase short-haul travel this quarter in markets that are expected to have higher business travel demand.

Southwest Airlines is the latest airline to express optimism about travel demand.

American Airlines Group, United Airlines, and Alaska Air Group Inc last week stated that their current quarter’s revenue would exceed pre-pandemic levels, even though their capacity remains below 2019.

Peter McNally, Vice President and Global Sector Lead at Third Bridge, stated that “air travel demand is rising and pricing power have returned to the industry, leading into a strong revenue outlook.”

The boom in consumer demand is helping carriers to deal with the soaring fuel prices, which have more that doubled over the past year.

Although fuel is the second-biggest cost in the industry after labor, major U.S. airlines don’t hedge against rising oil prices.

Southwest Airlines however stated that its multi-year fuel hedge program has helped offset the rises in jet fuel prices in the first quarter.

According to Refinitiv data, the adjusted loss for the first quarter was 32 cents per share. This compares with analysts’ expectations of a loss at 30 cents per share.

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