Southwest Airlines cuts outlook and warns on delta Covid variant hurting bookings

Southwest Airlines lowered its revenue and profit forecast Wednesday, blaming the Covid delta variant for a drop in bookings.

The airline is the second in less than a week to warn that the fast-spreading variant will weigh on results. Frontier Airlines said Thursday it would break even, at best, this quarter because of the variant.

Southwest said it expects August operating revenue to be down 15% to 20% compared with the same month in 2019. That’s more than an earlier forecast for a 12% to 17% drop.

“The Company has recently experienced a deceleration in close-in bookings and an increase in close-in trip cancellations in August 2021, which are believed to be driven by the recent rise in COVID-19 cases associated with the Delta variant,” Southwest said in a filing.

It said September revenue will likely be down 15% to 25% from 2019, its first estimate for the month.

Southwest said it was profitable in July, but the impact of the delta variant in August and September “will make it difficult” to turn a profit in third quarter without counting federal aid that’s provided some temporary relief in covering its labor costs.

Southwest has restored more capacity compared with airlines like Delta and United, and the carrier’s pilots’ union has raising concerns that staffing shortages could hurt operation this fall.

The Southwest Airlines Pilots Association “believes that without a schedule reduction, operational woes will continue, but it does not appear that Network Planning is properly accounting for the operational woes from much more than just the ‘weather disruptions,’” it said in a note to pilots on Monday.

Southwest and other airlines have been racing to train pilots to meet a surge in demand this summer. Staffing shortages have contributed to hundreds of cancellations after demand spiked in recent months, faster than many airline executives expected. Airlines accepted $54 billion in federal payroll aid since March 2020 to get through the crisis but they also urged staff to take leaves or retire early to cut costs in the depths of the pandemic.

“November and December have already been cut once, but high ticket sales are leaving little room to reduce the schedule and still accommodate the routes that have already been sold,” Southwest’s pilots union said.

Leslie Josephs https://www.cnbc.com/