Remainder of year a mystery for airlines
American, Southwest express optimism, misgivings about future
DALLAS – American Airlines and Southwest Airlines posted third-quarter profits thanks to federal pandemic aid, and they expect planes to be packed over the holidays.
Still, the carriers reported Thursday that higher expenses for jet fuel and labor are casting uncertainty over the rest of the year. Southwest expects to lose money in the fourth quarter.
Airlines are still waiting for a significant rebound in business travel.
And the airlines are struggling to comply with a White House order to get their workforces vaccinated. Each of the leading U.S. airlines is taking a different approach: United has a hard vaccine mandate. Delta is using a surcharge to push workers to get the shots. American and Southwest are searching for a way to satisfy the Biden administration without offending anti-vaccine employees.
It adds up to an interesting fall and winter for the industry, which is struggling to recover after being battered for more than a year by the COVID-19 pandemic.
Airline officials thought they had turned the corner on the recovery this summer, as domestic leisure travel hit prepandemic levels. But the highly contagious delta variant caused COVID-19 cases to surge, leading to a slowdown in airline bookings and a rise in cancellations.
“The third quarter started out very strong. … But then the spread of the delta variant led to fewer people flying,” American Airlines CEO Doug Parker and President Robert Isom said in a note to employees. “We were profitable in July, but that was followed by losses in August and September.”
Southwest said it lost $300 million in revenue during the quarter because of the variant.
Dallas-based Southwest took another $75 million hit after the quarter ended when it canceled over 2,300 flights in three days this month because of disruptions that cascaded out of control due to staffing problems.
Southwest officials said they
are making more cuts to the airline’s schedule through next March to make sure the work load matches the workforce. Both Southwest and American are hiring, and they say they will have enough employees for the holidays and next summer.
The airlines say the variant-fueled slump in ticket sales has subsided, and they are looking forward to a strong Thanksgiving and Christmas rush.
“Booking trends have recovered nicely on both the leisure and business front, and booking trends for the holidays are in line with 2019,” said Robert Jordan, who will become Southwest CEO in February.
American plans to run nearly a full schedule, including more than 6,000 flights on some peak days during the holidays. “We expect a lot of passengers, tremendous pent-up demand” as COVID-19 rates continue to decline, Isom said.
American, which is based in Fort Worth, Texas, said it earned $169 million in the third quarter after collecting nearly $1 billion in federal relief to cover most of its payroll costs. Revenue was $8.97 billion, down 25% from two years ago. American said fourth-quarter revenue would be 20% lower than the same period in 2019.
Southwest reported net income of $446 million after getting $763 million in federal aid. Revenue was $5.64 billion.
Both American and Southwest would have lost money without the federal pandemic aid, but the adjusted losses were slightly smaller than Wall Street had expected, according to FactSet surveys of analysts.