A Southwest Airlines jet is parked Ellison Onizuka Kona International Airport at Kehole awaiting passengers on January 20, 2024 in Kailua-Kona, Hawaii.
Kevin Carter | Getty Images
Southwest Airlines on Wednesday cut its second-quarter revenue forecast, citing changing booking patterns.
Southwest expects revenue per available seat mile, the amount the airline brings in for every seat it flies one mile, will fall between 4% and 4.5% in the second quarter over last year, after previously estimating a 1.5% to 3.5% decline.
It also said its unit expenses, excluding fuel, would be up as much as 7.5% over the year-earlier period and that capacity would still rise as much as 9% in that period, both unchanged from its previous forecast.
Southwest still expects record quarterly operating revenue in the second quarter.
Airlines are raking in record numbers of passengers but higher costs and growth in capacity have weighed on fares and profits.
“The reduction in the Company’s RASM [revenue per available seat mile] expectations was driven primarily by complexities in adapting its revenue management to current booking patterns in this dynamic environment,” Southwest said in a filing.
Other carriers like Delta and United, meanwhile, have been enjoying passengers’ return to international travel and have invested heavily in travelers’ willingness to pay more for roomier seats.
Southwest is under activist investor pressure from hedge fund Elliott Management, which reiterated calls on Wednesday for CEO Bob Jordan and Chairman Gary Kelly to be replaced.
Elliott said Wednesday the lowered outlook is “yet another example that fundamental leadership change is urgently needed at Southwest.”
“Southwest is led by a team that has proven unable to adapt to the modern airline industry; the Company’s release today seems to admit as much,” Elliott said in a statement.
The Dallas-based airline has expressed confidence in its leadership and reiterated that it is considering revenue initiatives like seating assignments or premium seating, which would be massive changes to the company’s simple business model that has been profitable for most of the last five decades.
“We will adapt as our customers’ needs adapt,” Jordan said at an industry event hosted by Politico earlier this month.
— CNBC’s Rohan Goswami contributed to this report.
Correction: An earlier version of this story misstated changes in Southwest’s capacity and cost estimates.
