DALLAS (AP) — Southwest Airlines is restricting hiring and ceasing flights to four airports as it grapples with weak financial results and delays in receiving new planes from Boeing.
Southwest and American Airlines both reported first-quarter losses Thursday. Demand for travel, including by business fliers, remains strong, but airlines are dealing with higher labor costs and delays in getting new planes from Boeing are limiting their ability to add more planes.
Southwest said it lost $231 million. CEO Robert Jordan said the airline was moving quickly to “address our financial shortfalls,” including limiting hiring to critical positions and asking employees to take unpaid time off.
The Dallas-based carrier expects to end the year with 2,000 fewer employees than it had at the beginning of the year. Southwest executives said the airline could cut those jobs without layoffs and layoffs.
In August, Southwest will stop flying to four airports: Cozumel in Mexico; Syracuse, New York; Bellingham, Washington; and George Bush Intercontinental Airport in Houston, where the airline's main operations are at the smaller Hobby Airport. Southwest hasn't left an airport since 2019, when it moved out of Newark, New Jersey and consolidated its New York City segment, flying out of LaGuardia Airport.
Southwest will cut half of its flights at Atlanta and a third at O'Hare Airport, increasing the airline's main Chicago service at Midway Airport.
The moves will help the airline focus on more profitable destinations and sort out a smaller-than-planned fleet of flights. It expects to receive only 20 new 737 Max 8 jets from Boeing this year, down from the 46 expected a few weeks ago. It will make up some of the shortfall by giving rest to fewer flights.
Boeing has struggled to slow production since a door plug exploded from an Alaska Airlines Max 9 in January, and that has disappointed its airline customers.
Dallas-based Southwest said its loss, excluding special items, was 36 cents a share. That was slightly worse than the loss of 34 cents per share Wall Street had expected.
Revenue rose to $6.33 billion. That was a company record for the January-March quarter, but it fell short of analysts' forecast of $6.42 billion and was not enough to offset rising costs, including a 19% increase in labor costs. Last-minute leisure trips were lower than expected, and some new markets performed poorly, the airline said.
Executives said Southwest is studying changes to boarding and seating to determine how customers will respond and how much money can be raised. They declined to provide details until an investor day in September, but chief commercial officer Ryan Green said bag fees and a screened premium cabin were not considered. Southwest, the only major US airline, does not charge extra for one or two checked bags.
American said it lost $312 million as labor costs rose 18%, or nearly $600 million. The airline expects earnings of between $1.15 and $1.45 per share in the second quarter — a busy time for travel. Analysts were expecting $1.15 per share, according to a FactSet survey.
The first-quarter loss excluding special items was 34 cents per share, worse than the 27 cents per share loss that analysts had predicted.
Revenue was $12.57 billion.
CEO Robert Isom said Americans are less affected by Boeing's problems because the airline has already received hundreds of new planes in recent years. Eight Boeing jets will not arrive this year as planned, the airline said. American has ordered Boeing Max 10s, which have not yet been certified by the Federal Aviation Administration, but those planes don't arrive until 2028.
“I've talked to everyone at Boeing, and the message I can speak to is one thing: work together,” Isom said on a call with analysts and reporters. “It starts with producing quality products one at a time off the assembly line … I can't tell if they're making progress or not.”
American has no problem getting new, smaller regional jets from Embraer. The Brazilian manufacturer is “incredibly reliable,” Isom said.
Shortly after a door plug exploded on an Alaska Airlines Max jet, travel site Kayak reported an uptick in the number of people filtering their flight searches to isolate the type of flight. On Thursday, American and Southwest officials said they have no evidence that Boeing's well-publicized safety problems are affecting consumers.
Southwest, which has an all-Boeing 737 fleet, said it surveys cancellations and finds that only 1% of that small group blame fear of flying. Airlines also track people looking at the type of aircraft for a plane — whether it's a Max or a different model of 737 — and say that hasn't seen much change either.
“It's not something customers are asking about in any big way,” said Andrew Watterson, the airline's chief operating officer.
Southwest shares fell 7%, while American gained 1.5%.
