Southwest Airlines trims flights again to manage staffing crunch
Southwest Airlines said mass flight cancellations and delays that disrupted travel for tens of thousands of customers earlier this month cost it $75 million and that it plans to further trim its schedule.
The Dallas-based airline on Thursday cut its December capacity to 92% of what it flew in the same month of 2019, down from a plan to fly 95% of its schedule two years ago.
Southwest canceled more than 2,000 flights between Oct. 8 and Oct. 13. It blamed the meltdown on bad weather in Florida and air traffic control issues, which was compounded by staffing shortages.
Its closest rivals, including those in Florida, had relatively minimal cancellations. On Oct. 8 in Orlando, one of the airports that Southwest highlighted as an issue in an customer apology, the airline had canceled more than a third of its scheduled departures, while American Airlines canceled 16% of its departures and Spirit Airlines scrapped 6%, according to aviation consulting firm Cirium.
The revenue hit, announced in quarterly results, came from flight cancellations, customer refunds and “gestures of goodwill,” Southwest said.
CEO Gary Kelly said in an earnings release that the airline’s 2022 schedule “reflects more conservative staffing assumptions, as well, all compared to historical norms.”
The airline reported a third-quarter profit of $446 million on Thursday compared with a $1.6 billion loss year earlier, thanks to a boost from federal aid and voluntary leaves of absence by employees.
Southwest’s revenue rose to $4.68 billion in the quarter up from $1.79 billion in the third quarter of last year.
“Our active (versus inactive) and available staffing fell below plan and, along with other factors, caused us to miss our operational ontime performance targets, and that created additional cost headwinds,” Kelly said. That along with a surge in Covid-19 cases led to a revenue hit of $300 million, he said.
Southwest first trimmed its schedule in August after operational strains and complaints from labor unions about employee exhaustion.
Here’s how Southwest performed in the third quarter compared with what Wall Street expected, based on average estimates compiled by Refinitiv:
Adjusted results per share: a loss of 23 cents versus an expected loss of 27 cents.
Total revenue: $4.68 billion versus expected $4.58 billion.
Southwest shares fell 1.6% to $48.66 on Thursday.
American on Thursday reported a $169 million profit for the third quarter, thanks to federal aid, and revenue of $8.97 billion, up from $3.17 billion during the same period a year ago. American’s shares added 1.9% on Thursday to $19.89.
Leslie Josephs www.cnbc.com