Southwest Airlines says travel demand is improving, forecasts fourth-quarter profit

Southwest Airlines on Wednesday said it expects to be profitable in the fourth quarter, thanks to stronger-than-expected leisure travel demand despite the emergence of the omicron variant of Covid.

The Dallas-based carrier forecast fourth-quarter revenue down 10% to 15% from the same period of 2019, when it generated $5.73 billion. Southwest also slightly lowered its fuel cost forecast for the quarter to no more than $2.25 a gallon, down from a range of $2.25 to $2.35 a gallon.

Southwest’s forecasts come ahead of an investor day presentation scheduled for midday Wednesday. In 2022, the airline said it expects to be profitable and estimated its capacity could range from a 3% decline compared with 2019 to 2% growth, and costs, excluding fuel, that are up to 12% higher than 2019.

The airline is on a hiring spree, aiming to add some 8,000 workers next year on top of 5,000 new employees this year.

Southwest’s network is concentrated in the United States, so it has less exposure to a host of new travel restrictions that governments have implemented since the variant was detected late last month.

Earlier Wednesday, Willie Walsh, director general of the International Air Transport Association, said in an industry webinar that the fresh travel restrictions in response to omicron, which range from new testing requirements to outright bans of foreigners, will likely hurt demand in the near term but that it’s too early to gauge the impact.

Leslie Josephs www.cnbc.com