Southwest Airlines Expects Delta Variant to Crimp Demand
Southwest Airlines no longer expects to make profits in the third quarter as a recent increase in coronavirus cases slows sales and leads to increased cancellations.
In a securities filing released on Wednesday, the company forecast that revenue for the three months ending in September would be down 15-20% from the same period in 2019, down three to four percentage points from compared to its previous estimate.
The airline’s revised forecast represents a rapid turnaround from a few weeks ago, when Southwest and other major carriers said business was booming and the highly contagious Delta variant of the virus was not affecting still sales. In fact, Southwest said on Wednesday that it was profitable again in July, but no longer expected to make a profit for the current quarter, at least after ruling out the effect of federal wage supports to the ‘industry.
At the end of last month, Scott Kirby, chief executive of United Airlines, said the Delta variant had not affected sales at all. “The most likely outcome is that the recovery in demand will continue largely unabated,” he said on a call to discuss quarterly financial results with analysts and reporters.
After climbing for months, the number of people traveling to the United States appears to have stagnated in recent weeks at around 80% of 2019 levels, according to airport screening data from the Transportation Security Administration. Yet more than 2.2 million people were tested on August 1, the highest figure compared to 2019 since the start of the pandemic. The rebound so far has been mainly due to people traveling on vacation or visiting friends and family.
Airlines had hoped that growing travel confidence and a widespread return to offices in the fall would help accelerate the recovery in business travel, which has lagged behind the rebound in leisure. But the Delta variant dashed those hopes as a growing number of companies delay reopening their offices. Stock prices of Southwest and the other three major US airlines fell 1-2% in pre-market trading.
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