Southwest shares tumble 9% as costs rise, unit revenue slips

Southwest Airlines shares tumbled nearly 9% Thursday after the airline reported lower unit revenue and higher costs for the second quarter — and said the trends are likely to continue this quarter. The Dallas-based airline’s second-quarter unit revenue dropped 8.3% from a year earlier, Southwest said, citing a policy change last summer that removed expiration dates from Covid pandemic travel credits. The carrier said it expects unit revenue to fall as much as 7% during the third quarter on capacity up 12% from a year earlier. It blamed “challenging comparisons from the pent-up travel demand surge in 2022, and higher than seasonally-normal growth.” Airlines have enjoyed record revenue in recent months, but airfare in the U.S. has dropped from 2022, according to the latest inflation read. Southwest said it is “revamping” 2024 schedules to reflect changing customer demand as business travel revenue recovers but lags pre-pandemic levels. “We are working to align our network, fleet plans, and staffing to better reflect the current business environment,” CEO Bob Jordan said in an earnings release. Jordan said the revamp could mean bigger drops in capacity than usual when demand would normally pick up. The airline also plans to cut some short-haul flights in favor of longer ones as well as reduce very early and very late departures. Here’s how Southwest performed in the second quarter, compared with Wall Street expectations according to Refinitiv consensus estimates: Adjusted earnings per share: $1.09 vs. an expected $1.10; Total revenue: $7.04 billion vs. an expected $6.98 billion. The airline’s net income fell to $683 million, or $1.08 a share, down 10% from $760 million, or $1.20 per share, during the second quarter of 2022. Revenue came in at a record $7.04 billion for the three months ended June 30, ahead of analyst expectations and up 4.6% from the same quarter last year.<br/>