Southwest Airlines forecasts strong fourth-qtr revenue on resilient travel demand

Southwest Airlines forecasts strong fourth-qtr revenue on resilient travel demand
© Reuters. FILE PHOTO: A Southwest Airlines Boeing 737-800 plane is seen at Los Angeles International Airport (LAX) in the Greater Los Angeles Area, California, U.S., April 10, 2017. Picture taken April 10, 2017. REUTERS/Lucy Nicholson

(Reuters) – Southwest Airlines (NYSE:LUV) Co on Thursday forecast a higher fourth-quarter revenue, as the U.S. carrier benefited from strong leisure travel demand that is showing no signs of easing in the face of economic worries.

The company said it expects operating revenue to jump 13% to 17% in the current quarter versus 2019, though it expects to have about 2% lower capacity.

“We currently expect revenue trends to improve sequentially from third quarter to fourth quarter 2022, despite lower capacity,” Chief Executive Officer Bob Jordan said in a statement.

Major U.S. carriers are enjoying the strongest consumer demand in three years, but the airline industry is facing higher fuel and wage bills amid worries that consumers may cut travel spending due to recession risks.

“The company continues to experience inflationary cost pressures in fourth quarter 2022, in particular with higher rates for labor, benefits, and airports,” Jordan said.

The Dallas-based company said it expects strong demand trends to continue into 2023, but warned its fleet utilization is expected to be limited by industry-wide pilot shortages.

The company said in July it was on track to hire more than 1,000 pilots this year and plans to recruit about 2,200 in the next.

Southwest said it continues to work with Boeing (NYSE:BA) to finalize 2023 aircraft delivery plans, adding that it expects the delivery delays to persist into 2024.

The airline said its route network will be about 90% restored by the summer of 2023, and fully restored by December next year, versus 2019 flight levels.

The carrier also expects its cost per available seat mile, excluding fuel, to increase between 14% to 18% in the fourth quarter, from the same period in 2019.

Southwest reported third-quarter operating revenue of $6.22 billion, a 10.3% rise compared with same period in 2019.

The carrier reported a net income of $277 million, or 44 cents per share, compared to $659 million, or $1.23 per share, in the third quarter of 2019.

Source: Reuters