Southwest to curb hiring and drop 4 airports after loss American Airlines also reports 1Q loss

DALLAS (AP) — Southwest Airlines is restricting hiring and ceasing flights to four airports as it grapples with weak financial results and delays in receiving new planes from Boeing.

Southwest and American Airlines both reported first-quarter losses Thursday. Demand for travel, including from business travelers, remains strong, but airlines are dealing with higher labor costs and delays in flight deliveries limiting their ability to add more flights.

Southwest said it lost $231 million. CEO Robert Jordan said the airline was moving quickly to “address our financial dysfunction,” including slowing hiring and furloughing employees.

The Dallas-based carrier expects to end the year with 2,000 fewer employees than it had at the beginning of the year.

Southwest will stop flying to four airports: Cozumel, Mexico; Syracuse, New York; Bellingham, Washington; and George Bush Intercontinental Airport in Houston, where the airline's main operations are at the smaller Hobby Airport.

The closures will help the airline focus on more profitable destinations and sort out a smaller-than-planned fleet of flights. It expects to receive only 20 new 737 Max 8 jets from Boeing this year, down from the 46 expected a few weeks ago. It will make up some of the shortfall by giving rest to fewer flights.

Boeing has struggled to slow production since a door plug exploded from an Alaska Airlines Max 9 in January, and that has disappointed its airline customers.

Dallas-based Southwest said its loss, excluding special items, was 36 cents a share. That was slightly worse than the loss of 34 cents per share Wall Street had expected.

See also  Chargers select USC WR Brendan Rice, son of Hall of Famer Jerry Rice, in 7th round of 2024 NFL Draft

Revenue rose to $6.33 billion, below analysts' estimates of $6.42 billion.

American said it lost $312 million as labor costs rose 18%, or nearly $600 million. The airline expects earnings of between $1.15 and $1.45 per share in the second quarter — a busy time for travel. Analysts were expecting $1.15 per share, according to a FactSet survey.

The first-quarter loss excluding special items was 34 cents per share, worse than the 27 cents per share loss that analysts had predicted.

Revenue was $12.57 billion.

CEO Robert Isom said Americans are less affected by Boeing's problems because the airline has already received hundreds of new planes in recent years. American has ordered Boeing Max 10s, a larger model that has yet to be certified by the Federal Aviation Administration, but those planes don't start showing up until 2028.

“If they don't get it together, we've made sure we're covered,” Isom told CNBC. American stopped short of saying it would place Boeing orders in competition with Airbus, saying only that “we'll take care of it.”

In premarket trading, Southwest shares fell 9%, while American shares rose 3%.

Leave a Reply

Your email address will not be published. Required fields are marked *