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Southwest cuts sales outlook as 737 MAX grounding hits US carriers
NEW YORK, March 27, 2019 (BSS/AFP) – Southwest Airlines trimmed its
revenue estimate Wednesday, citing flight cancellations due to the Boeing 737
MAX grounding among key factors dragging on earnings.
Southwest, which focuses primarily on travel within the United States,
cancelled 9,400 flights in the first quarter, with the Boeing grounding
accounting for about a third of that number, the company said in a securities
filing.
The disclosure highlighted the hit from the Boeing debacle to US airlines
following a Federal Aviation Administration order on March 13 after two
deadly crashes involving the aircraft.
Larger carriers American Airlines and United Continental have also
signaled a likely hit to first-quarter earnings resulting from cancelled 737
MAX flights.
About 40 percent of Southwest’s flights were cancelled due to weather,
with the remaining 30 percent resulting from maintenance disruptions
connected to talks with a mechanics union.
In total, these cancelations will result in $150 million in lost revenues
in the first quarter, on top of the previous hit of $60 million due to lost
business from the government shutdown, the airline said.
Dallas-based Southwest has grounded all 34 of its 737 MAX 8 aircraft and
also has 41 remaining MAX deliveries scheduled in 2019, with more than 300
orders and options beyond this year.
“Due to the current uncertainty regarding the duration of the MAX
groundings and any requirements for reinstatement of the aircraft into
service, it is difficult for the company to forecast the impact of the MAX
groundings beyond first quarter 2019,” Southwest said.
“The company is proactively managing cancellations, minimizing operational
disruptions, reaccommodating customers, and minimizing the impact on its on
time performance.”
American Airlines, which has 24 Boeing MAX 8 planes and an additional 76
on order, said in a March 25 securities filing that it was unable to estimate
the financial hit from the FAA order, but that complying with the mandate is
causing “significant disruption to our customers and financial costs to us.”
United Continental said in a March 15 filing that the FAA grounding, which
affected about 40 flights per day, had not yet significantly impacted
financial performance.
“However, the financial and operational impact to the company is expected
to increase if the grounding extends into the peak summer travel season,”
United said.
US carriers are scheduled to report first-quarter earnings in the latter
half of April.
BSS/AFP/FI/ 2015 hrs