A Southwest Airlines jet plane parks and waits for passengers at Ellison Onizuka Kona International Airport in Kailua-Kona, Hawaii on January 20, 2024.
Kevin Carter | Getty Images
Southwest Airlines Shares fell on Wednesday after the airline lowered its second-quarter earnings forecast, citing changing booking patterns.
The stock fell about 4% in early trading but later recovered some losses.
Southwest now expects its revenue per available seat mile — the revenue an airline makes for each seat it flies one mile — to fall 4% to 4.5% in the second quarter from a year ago, compared with a previous forecast of a decline of 1.5% to 3.5%.
The company also expected unit costs excluding fuel to increase by as much as 7.5% compared to the same period a year ago, compared with previously expecting no change.
The company said capacity would increase by as much as 9 percent, instead of the flat growth in traffic it had previously expected.
Southwest Airlines still expects second-quarter operating revenue to be a record.
Airlines are enjoying record numbers of passengers, but rising costs and capacity demands are weighing on fares and profits.
“Reducing our RASM [revenue per available seat mile] Southwest attributed the decline to the complexity of adapting revenue management to current booking patterns in this dynamic environment, among other factors. Filing.
Other careers delta and UnitedAirlines, meanwhile, have welcomed the return of international passengers and have invested heavily to cater to travelers’ willingness to pay more for more space in their seats.
Southwest Airlines is under pressure from activist investors from hedge fund Elliott Management, and the airline on Wednesday reiterated its demands for the replacement of CEO Bob Jordan and Chairman Gary Kelly.
In a statement, Elliott said the outlook downgrade was “yet another example of the urgent need for fundamental changes in Southwest’s leadership.”
“Southwest is led by a team that has proven unable to adapt to the modern airline industry, and the company’s announcement today appears to be an admission of that.” Elliott said in a statement.
The Dallas-based airline expressed confidence in its management and reiterated that it is exploring revenue-generating measures such as assigned seating and premium seating, which would mark a major shift in the simple business model that has made it profitable for most of the past 50 years.
“As our customers’ needs change, we adapt,” Jordan said at an industry event hosted by Politico earlier this month.