DALLAS (AP) — Southwest Airlines will limit fares and stop flying to four airports due to weak financial results and delays in getting new planes from Boeing.
Southwest and American Airlines both reported first-quarter losses on Thursday. Travel demand, including from business travelers, remains strong, but airlines are dealing with higher labor costs, and delays in aircraft deliveries are limiting their ability to add more flights.
Southwest said it lost $231 million. CEO Robert Jordan said the airline was responding “quickly to address our financial poor performance”, including slowing hiring and asking employees to take time off.
The Dallas-based carrier said it expects to end the year with 2,000 fewer employees than it did at the beginning of the year.
Southwest will also cease flights to four airports: Cozumel, Mexico; Syracuse, New York; Bellingham, Washington; and George Bush Intercontinental Airport in Houston, where the airline’s major operations are based at Small Hobby Airport.
The closure will allow the airline to focus on more profitable locations and deploy a fleet of aircraft that will be smaller than it planned. Southwest said it expects to get only 20 new 737 Max 8 jets from Boeing this year, down from 46 a few weeks ago. It will make up some of the shortfall by retiring fewer aircraft.
Boeing has struggled with slow production since an Alaska Airlines Max 9 door plug burst in January, frustrating its airline customers.
Dallas-based Southwest said its loss excluding special items was 36 cents a share. That was slightly worse than the loss of 34 cents per share expected by Wall Street.
Revenue rose to $6.33 billion, falling short of analysts’ forecast of $6.42 billion.
American said it lost $312 million as labor costs rose 18%, or about $600 million. The airline said it expected to return to profitability in the second quarter – a busy time for travel – and have earnings of between $1.15 and $1.45 per share. Analysts expected $1.15 per share, according to a FactSet survey.
First-quarter loss excluding special items was 34 cents per share, worse than analysts’ forecast of 27 cents per share.
Revenue was $12.57 billion.
CEO Robert Isom said American is less affected by Boeing’s problems because the airline has already received hundreds of new planes in recent years. American has ordered Boeing Max 10s, a larger model that has not yet been certified by the Federal Aviation Administration, but those planes won’t start appearing until 2028.
“If they don’t get it together, we’ve also made sure we’re safe,” Isom told CNBC. He declined to say whether American would hand Boeing orders to rival Airbus, saying only, “We’ll take care of it.”
In premarket trading, Southwest shares were down 9% while American shares were up 3%.
