Southwest Airlines expects to be profitable in fourth quarter on stronger travel demand

4:05 pm Wednesday, December 08th, 2021

By Rajesh Kumar Singh and Aishwarya Nair

(Reuters) – Southwest Airlines Co said on Wednesday it was expecting to be profitable in the fourth quarter on the back of stronger travel demand and fares.

It had previously forecast a loss for the quarter due to mounting costs.

The Texas-based carrier also said it expects to be “solidly” profitable next year and is trying to ensure adequate staffing as well as restore operational reliability.

Southwest’s upbeat outlook comes at a time when the airline industry is grappling with the uncertainty caused by the Omicron coronavirus variant. The flurry of new testing rules and border closings has raised concerns ahead of the important Christmas travel season.

The airline said it has yet to feel the new coronavirus variant’s impact as leisure bookings for December travel are topping its expectations. Bookings in the January quarter are also in line with the company’s estimates, Southwest added.

Chief Financial Officer Tammy Romo, however, warned that any material impact of the Omicron variant could upset the company’s projections.

“Any number of external factors may change and impact this plan,” she told investors. “But we were cautious in our assumptions about travel demand.”

The company’s shares were trading up 0.8% at $45.56.

Southwest, which has had to cancel flights en masse partly due to staff shortages, said its efforts to hire 5,000 employees this year are “going well.” The company also plans to add at least 8,000 employees to its workforce next year.

But the carrier said a tight labor market will likely not only pose hiring challenges, but also inflate its costs.

The staffing crunch has forced the company to trim capacity in the quarter through January. In 2022, the carrier expects capacity to be in the range of down 3% to up 2% compared with 2019.

Southwest expects revenue in the quarter through December to recover to at least 90% of the 2019 levels. It refrained from providing any estimates for first-quarter revenue, citing the uncertainty caused by the new COVID-19 variant.

(Reporting by Rajesh Kumar Singh in Chicago and Aishwarya Nair in Bengaluru; Editing by Louise Heavens and Matthew Lewis)