Southwest slows growth plans again with costs rising
Southwest again trimmed growth plans for this quarter in response to rising costs and an industrywide glut of flights that’s pulling down fares. Capacity will increase about 10% in the period, down from as much as 12%, the carrier said in a statement Thursday that also detailed Q4 results. Southwest had already cut the target in October from as much as 16%. The latest move adds to efforts by some carriers to slow planned growth in the US market, where demand has moderated outside of the winter holidays and ticket prices have dropped. Persistently high costs, delayed aircraft deliveries and prolonged engine maintenance are further straining the industry. Investors welcome the moves to tighten capacity, which can allow carriers to raise fares and improve profitability by better matching supply to demand. The shares rose 3.3% at 9:37 a.m. in New York. Southwest cited rising labor and maintenance expenses this quarter and said it “currently expects similar cost pressures throughout the year.” The carrier’s pilots approved a new contract recently that will boost pay 50% over five years, and the company is negotiating a new labor agreement with flight attendants. Excluding fuel, unit costs are expected to rise 6% to 7% in Q1. Southwest no longer expects to begin flying the Boeing Co. 737 Max 7 this year as the plane awaits certification from federal safety regulators. The carrier cut the number of aircraft deliveries it expects from Boeing in 2024 to 79 from an earlier plan for 85 due to manufacturing delays at the planemaker. Southwest, which does not operate the Max 9, has a large order for the Max 7 and has called the plane critical to its plans to retire older jets and refresh its fleet.<br/>
https://portal.staralliance.com/cms/news/hot-topics/2024-01-26/unaligned/southwest-slows-growth-plans-again-with-costs-rising
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Southwest slows growth plans again with costs rising
Southwest again trimmed growth plans for this quarter in response to rising costs and an industrywide glut of flights that’s pulling down fares. Capacity will increase about 10% in the period, down from as much as 12%, the carrier said in a statement Thursday that also detailed Q4 results. Southwest had already cut the target in October from as much as 16%. The latest move adds to efforts by some carriers to slow planned growth in the US market, where demand has moderated outside of the winter holidays and ticket prices have dropped. Persistently high costs, delayed aircraft deliveries and prolonged engine maintenance are further straining the industry. Investors welcome the moves to tighten capacity, which can allow carriers to raise fares and improve profitability by better matching supply to demand. The shares rose 3.3% at 9:37 a.m. in New York. Southwest cited rising labor and maintenance expenses this quarter and said it “currently expects similar cost pressures throughout the year.” The carrier’s pilots approved a new contract recently that will boost pay 50% over five years, and the company is negotiating a new labor agreement with flight attendants. Excluding fuel, unit costs are expected to rise 6% to 7% in Q1. Southwest no longer expects to begin flying the Boeing Co. 737 Max 7 this year as the plane awaits certification from federal safety regulators. The carrier cut the number of aircraft deliveries it expects from Boeing in 2024 to 79 from an earlier plan for 85 due to manufacturing delays at the planemaker. Southwest, which does not operate the Max 9, has a large order for the Max 7 and has called the plane critical to its plans to retire older jets and refresh its fleet.<br/>
