Southwest Airlines, one of the largest commercial airlines in the United States, has announced a reduction in its growth plans due to ongoing delays in Boeing’s airplane deliveries. The airline reported a wider loss for the first quarter of this year compared to the same period last year and cautioned that these delays will continue to hamper its growth until 2025.
Southwest Airlines had initially planned to expand its capacity by 6% this year but has now revised it down to 4%. For the second quarter, the airline expects growth of 8% to 9%, although it anticipates a decrease in revenue of up to 3.5%. These projections have caused concern among investors, leading to a roughly 10% drop in Southwest’s share price during premarket trading.
The airline announced that it will receive only 20 Boeing 737 Max 8 planes, significantly lower than its previous forecast of 46. Consequently, Southwest will delay retiring some of its older Boeing planes and implement cost-cutting measures such as offering staff voluntary time off. By the end of this year, the carrier expects to have 2,000 fewer employees compared to the end of 2023. Additionally, Southwest plans to shut down operations at several airports, including Syracuse, New York; Bellingham International Airport in Washington; Cozumel International Airport; and Houston’s George Bush Intercontinental.
CEO Bob Jordan emphasized the importance of achieving financial goals in light of the challenges posed by Boeing’s further aircraft delivery delays. He stated that Southwest is working swiftly to mitigate operational and financial impacts while ensuring reliable flight schedules for customers. This is crucial for the airline, as it operates an all-Boeing 737 fleet and is heavily dependent on Boeing’s deliveries.
Southwest Airlines had previously warned about the impact of slower Boeing deliveries on its growth plans. The first-quarter performance of the airline fell slightly short of Wall Street expectations, with a loss per share of 36 cents (adjusted) compared to an estimated loss of 34 cents. However, revenue rose by almost 11% to $6.33 billion, slightly below analysts’ estimates.
The ongoing delays in Boeing’s airplane deliveries have proven to be a significant challenge for Southwest Airlines. The airline’s decision to adjust its growth plans and implement cost-cutting measures reflects its determination to overcome these obstacles and maintain financial stability. With the reduction in capacity expansion, Southwest aims to navigate through the impact of Boeing’s delays and ensure the reliability of its flight schedules for customers.
As Southwest Airlines works towards achieving its financial goals, it remains to be seen how the airline will adapt to the changing dynamics of the aviation industry. The next few years will be crucial for Southwest as it navigates through the lasting impact of Boeing’s airplane delays until 2025.
