Travel demand is improving, says Southwest Airlines; Forecasts fourth-quarter profit

Travel demand is improving, says Southwest Airlines; Forecasts fourth-quarter profit

Summary:

  • Southwest increased its revenue expectation for the fourth quarter while lowering its fuel-price outlook.
  • The airline expects profits in 2022, even though it will be a “transition” year.
  • It made its prediction before the investor day presentations.

Thanking the COVID variant

Southwest Airlines said on Wednesday that the fourth quarter will be profitable. Despite the emergence of the omicron, a form of COVID, they credit higher-than-expected leisure travel demand.

The Dallas-based carrier expects fourth-quarter revenue to be down 10% to 15% compared to the same period last year when it brought in $5.73 billion. Southwest also cut its fuel-cost prediction for the quarter from a range of $2.25 to $2.35 a gallon to no more than $2.25 a gallon.

Southwest’s predictions come ahead of an investor day presentation on Wednesday at noon. The airline said it intends to be profitable in 2022, with capacity ranging from a 3% decrease to a 2% increase in capacity and expenses compared to 2019. This does not include fuel prices that are up to 12% higher than in 2019.

Impact on hiring department

The airline is on a hiring binge, with plans to hire 8,000 more personnel next year, on top of the 5,000 it hired this year.

Southwest’s network is largely confined to the United States. As a result, it is less vulnerable to a slew of additional travel restrictions imposed by governments since the variation was discovered late last month.

Willie Walsh, director-general of the International Air Transport Association, said in an industry webinar earlier Wednesday that the new omicron travel limitations will have an impact. The impact of everything from stricter testing criteria to outright prohibitions on foreigners will most likely harm demand in the short term, but it’s too early to tell.

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