Southwest Airlines forecasts first-quarter loss on cancellations impact

Southwest Airlines forecasts first-quarter loss on cancellations impact

By Kannaki Deka

(Reuters) – Southwest Airlines Co on Thursday warned of a loss in the current quarter, as passengers shunned the carrier in the immediate aftermath of a tech meltdown that forced it to scrap thousands of flights between Christmas and New Years Eve.

The forecast heaps more pain on the largest U.S. domestic carrier, which is facing regulatory scrutiny over its flight scheduling and handling of over 16,700 cancellations that disrupted holiday plans for tens of thousands of passengers.

Southwest, which also reported a loss in the fourth quarter, said it expects a revenue hit of between $300 million and $350 million in the first quarter.

“Thus far in January 2023, the company has experienced an increase in flight cancellations and a deceleration in bookings, primarily for January and February 2023,” Southwest said. But current booking trends for March were encouraging, it added.

Operating revenue for the March quarter, when travel demand tends to slow, is expected to rise 20% to 24% year-over-year.

The company‘s under-fire chief executive, Bob Jordan, on Thursday once again apologized for the mass cancellations, which were attributed to Southwest’s outdated crew scheduling software.

The software buckled under the weight of reassignments that had to be done after a severe winter weather left the carriers crew stranded all over the country.

The company is “reexamining the priority of technology and other investments planned in 2023,” Jordan said in a statement.

Meanwhile, Southwest reported an adjusted loss of $226 million in the quarter through December, at a time when other major U.S. airlines such as United Airlines Holdings Inc and Delta Air Lines Inc reported higher-than-expected quarterly earnings on strong travel demand.

On a per share basis, Southwests adjusted loss was 38 cents. Operating revenue was $6.17 billion, up 7.7% versus 2019. On the other hand, expenses surged nearly 30% to $6.56 billion, in part due to the impact from cancellations.

For 2023, Southwest has forecast “solid profits” with year-over-year margin expansion.

Capacity is expected to rise 16% to 17% year-over-year in 2023, higher than originally planned, whereas costs excluding fuel are forecast to fall 6% to 8%, compared with an earlier expectation of a decline of 1% to 3%.