The benefit of Southwest Airlines in the third quarter fell by 30 %at 193 million dollars, despite a record turnover due to the boom in leisure travel during the summer.
The pioneer airline of the low-cost movement in air travel in the United States is losing its pricing power even though labor costs increase. Southwest said Thursday it would limit its plans to growth next year due to changes in travel, including a disappointing and slow recovery of business travel. “The whole sector is obviously under pressure”CEO Robert Jordan said on CNBC. “Costs are increasing, and a lot of that is due to the cost of labor. »
The results, and in particular Southwest’s plans to slower growthare likely to reinforce concerns about weakening demand for affordable domestic travel, Southwest’s core business. Two low-cost airlines, which also target low-price conscious travelers, posted losses in the third quarter. Spirit Airlines blamed its $158 million loss on weaker demand and discounted fares. CEO Ted Christie said demand and prices have not returned to normal, even for holiday travel, and he said Spirit would scale back its growth plans. Frontier Airlines lost $32 million. CEO Barry Biffle said rising fuel prices and a “uneven recovery in demand” were key factors, and he said the airline would focus its growth on underserved markets.
Airlines have massively added flights this year, which seems to make lower prices. Jordan declined to say that Southwest had added too many flights, but he admitted that travel business revenues have not recovered as quickly as expected for the airline and demand from leisure travelers decreases more sharply during off-peak seasons like fall and late winter. Southwest responded by increasing the frequency of low fare sales to fill seats. Chief Commercial Officer Ryan Green said on a call with analysts that sales occur “when we have distressed inventory to sell” but are not available on high-demand flights.
