Southwest and JetBlue give upbeat revenue outlooks despite inflation worries

Southwest Airlines Co (LUV.N)and JetBlue Airways on Thursday May 26 gave upbeat revenue forecasts for the current quarter on strong travel demand, despite concerns that rising inflation may weigh on consumer spending.

U.S. airlines have been buoyed, and in some cases surprised, by how quickly travel snapped back from the depths of the COVID-19 pandemic, leaving them struggling to add capacity in part due to staff shortages.

As such, they have been able to raise ticket prices that have diminished the impact of higher fuel prices due to the war in Ukraine and elevated labor costs.

“The improvement in the company’s second quarter 2022 operating revenue guidance is primarily attributable to continued passenger yield strength,” Southwest said in a filing.

However, decades-high inflation has darkened the outlook for the U.S. economy as consumers pull back on discretionary spending, leading to concerns that travel demand may take a hit.

Shares of both the airlines were up about 2% before the bell, even as they hiked their fuel cost expectations.

Southwest added it is on track to report “solid profits” for the quarter and for the rest of 2022.

The Texas-based carrier, however, said it expects available seat miles, or capacity, for the quarter to fall about 7% versus pre-pandemic levels.

JetBlue said it expects capacity to be up 2% to 3%, up from its prior expectation of a flat to 3% rise, though the carrier flagged industry-wide weather and air traffic control-related disruptions. reuters.com