AP

Southwest posts record revenue but warns of rising costs

Jul 28, 2022, 8:52 AM | Updated: 1:38 pm

DALLAS (AP) — Southwest Airlines’ second-quarter profit doubled to $760 million on record revenue, but the carrier warned that rising costs and lower productivity are likely to continue in the second half of the year.

Southwest shares fell 7% in afternoon trading Thursday.

Air travel has bounced back this year from pandemic depths, and that is particularly true for Southwest’s strength in leisure travel within the United States. The Dallas carrier said ticket demand has continued in the third quarter.

But costs are rising sharply, too.

Southwest’s fuel spending more than doubled, an increase of more than $800 million from a year ago, even though the airline hedges, or makes investments to offset rising energy prices. Spending on wages and benefits rose 21%, or about $400 million in a year.

Southwest and other airlines are also dealing with high numbers of canceled and delayed flights this summer, which adds to costs.

CEO Robert Jordan said that in the second quarter Southwest had to cope with “inflationary pressures and headwinds from operating at suboptimal productivity levels in second quarter, which we expect will continue in second half” of this year.

Still, Jordan said, the airline continues to expect it will be “solidly profitable” for the rest of the year barring any major surprises.

Airlines are recovering from the worst of the pandemic. American and United just reported their first profitable quarter not counting government aid. The industry is not in the clear, however. Business and international travel have not fully recovered, and consumers are paying more for staples like food and gasoline, leaving less for other spending.

During a call with analysts, Jordan was asked about the biggest single risk to Southwest’s recovery.

“The biggest thing is just not one thing, but it’s all the uncertainty on the horizon,” he said. “You’ve got recession potential. You’ve got a lot of variability in fuel prices … you have potential variability in (travel) demand because of all those things.”

Southwest has been hiring pilots and other workers to stabilize its operation after a bad summer in 2021 and another stretch of mass flight cancellations last fall. Two months ago, it hit staffing levels that it had not reached since the pandemic led it and other carriers to convince thousands of workers to quit or take long-term leave.

The airline said it expects to add 10,000 jobs this year but will begin “moderating” hiring in the second half of the year. Even with less hiring, Southwest expects non-fuel costs to rise by 12% to 15% per mile in the third quarter.

Southwest pared flights from its summer schedule after widespread disruptions this spring. It said it has added back some short routes that are popular with business travelers. Southwest said customers from small businesses, government and education are flying at pre-pandemic rates, but corporate travel including by banking and technology companies remains depressed.

Southwest’s second-quarter profit compared with $338 million a year ago and also topped the $741 million it earned in the same period of 2019, before the pandemic.

The airline reported that adjusted earnings were $1.30 per share. Revenue jumped 68% to $6.73 billion.

Analysts expected earnings of $1.17 per share on revenue of $6.69 billion, according to FactSet.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

Arizona and New York attorneys feud over extraditing suspect...

Associated Press

Why Alvin Bragg and Rachel Mitchell are fighting over extraditing suspect in New York hotel killing

Maricopa County Attorney Rachel Mitchell says she isn't into extraditing a suspect due to her lack of faith in Manhattan’s top prosecutor.

2 days ago

A Gila monster is displayed at the Woodland Park Zoo in Seattle, Dec. 14, 2018. A 34-year-old Color...

Associated Press

Colorado man dies after being bitten by pet Gila monster

A Colorado man has died after being bitten by his pet Gila monster in what would be a rare death by one of the desert lizards if the creature's venom turns out to have been the cause.

3 days ago

Police clear the area following a shooting at the Kansas City Chiefs NFL football Super Bowl celebr...

Associated Press

1 dead, many wounded after shooting at Kansas City Chiefs’ Super Bowl victory parade

One person died after 22 people were hit by gunfire in a shooting at the end of the Kansas Chiefs' Super Bowl victory celebration Wednesday.

10 days ago

This image from House Television shows House Speaker Mike Johnson of La., banging the gavel after h...

Associated Press

GOP-led House impeaches Homeland Security Secretary Mayorkas — by one vote — over border management

Having failed to impeach Homeland Security Secretary Alejandro Mayorkas the first time, House Republicans are determined to try again Tuesday.

11 days ago

Defense Secretary Lloyd Austin, right, and Kenya's Defense Minister Aden Duale, left, listen during...

Associated Press

Defense Secretary Lloyd Austin hospitalized with bladder issue

Defense Secretary Lloyd Austin has been hospitalized following symptoms pointing to an “emergent bladder issue."

13 days ago

Joel Osteen, the pastor of Lakewood Church, stands with his wife, Victoria Osteen, as he conducts a...

Associated Press

Woman firing rifle killed by 2 off-duty officers at Houston’s Lakewood Church run by Joel Osteen

A woman entered the Texas megachurch of Joel Osteen and started shooting with a rifle Sunday and was killed by two off-duty officers.

13 days ago

Sponsored Articles

...

DISC Desert Institute for Spine Care

Sciatica pain is treatable but surgery may be required

Sciatica pain is one of the most common ailments a person can face, and if not taken seriously, it could become one of the most harmful.

...

Collins Comfort Masters

Here’s 1 way to ensure your family is drinking safe water

Water is maybe one of the most important resources in our lives, and especially if you have kids, you want them to have access to safe water.

...

Day & Night Air Conditioning, Heating and Plumbing

Valley residents should be mindful of plumbing ahead of holidays

With Halloween in the rear-view and more holidays coming up, Day & Night recommends that Valley residents prepare accordingly.

Southwest posts record revenue but warns of rising costs