Southwest Airlines is ceasing operations at four airports, and reducing flights from others, in an effort to cut costs as its growth plans were also curtailed by fewer-than-expected plane deliveries from Boeing.
The airline, which flies only Boeing 737 planes, said on Thursday that delays from the embattled aircraft manufacturer contributed to its struggles. Southwest reported a loss of $231 million for the first quarter, worse than analysts expected, sending its share price down 10 percent in early trading.
To cut costs, Southwest said, it will cease operations at four airports from early August: Bellingham International Airport in Washington State, Cozumel International Airport, George Bush Intercontinental Airport in Houston and Syracuse Hancock International Airport. It will also “significantly restructure” its flights from other airports, most notably by reducing flights at Hartsfield-Jackson Atlanta and Chicago O’Hare International Airports.
Southwest’s chief executive, Bob Jordan, said in an interview with CNBC on Thursday that the decision to exit those airports was unrelated to delays in receiving new Boeing planes, although those delays were causing other problems.
“The network actions have really nothing to do with the Boeing delay. We are taking network actions regardless,” he said. “Now, the Boeing delays are very painful. They cause us to replan, they hurt us on the revenue front, they cause us to be inefficient, and we’re working all of that.”
The airline’s woes were another ripple effect of the incident on Jan. 5, when a panel of a Boeing 737 Max 9 jet blew out during an Alaska Airlines flight. The event led to the temporary grounding of the popular jet model and a slowdown in production as Boeing has faced increased regulatory scrutiny over its quality control.
Southwest said it expected to get 20 new Boeing jets this year, down from the 46 it previously anticipated. The timing of the deliveries depends on the Federal Aviation Administration, which has capped Boeing’s production while it gets quality issues under control.
“The recent news from Boeing regarding further aircraft delivery delays presents significant challenges for both 2024 and 2025,” Mr. Jordan said in a statement.
The airline said it would limit hiring and end the year with 2,000 fewer employees. It also said it planned to put fewer planes out of service than it previously planned.
On Wednesday, Boeing reported a $355 million loss for the first quarter, a steep setback that was nonetheless less than analysts expected.
Demand for travel remains robust, and while other airlines are trying to manage the production slowdown at Boeing, Southwest appears more adversely affected than its rivals, many of which also buy planes from Airbus.
American Airlines reported a quarterly loss of $312 million on Thursday, but provided a better-than-expected forecast for earnings in the current quarter and maintained its growth target for the year.
Alaska Airlines and United Airlines recently reported narrower losses than expected in the first three months of the year, and said they would have reported profits if the Boeing 737 Max 9 had not been grounded, albeit briefly, after the Jan. 5 flight. Delta Air Lines was the only major airline to report a profit in the first quarter.
Niraj Chokshi contributed reporting.
Source Agencies
