Skift Take
All of the airline companies are facing a spike in fuel prices, with labor and other costs up also. Which will strike revenues.
Jay Shabat
Delta and Southwest looked for to reassure investors Thursday, following unfavorable commentary from several airlines earlier in the week. All of them are challenging a spike in fuel rates, with labor and other expenses up as well. And that’s going to hit the bottom line– though some will be impacted more than others.
Frontier was first to trigger concern following a big cut to its revenues forecast for the 3rd quarter: It now anticipates to lose cash at the operating level. Spirit’s latest outlook was even more disconcerting.
But on the income side, said Southwest’s CEO Robert Jordan, “We’re just not seeing the weak point.” The Dallas-based airline did see some unforeseen reservation softness in August, an advancement Jordan recommended may be connected to schools opening previously in the month. “Looking previous August, we’re seeing extremely strong leisure demand and strong business demand.”
Delta too, sounded bullish regardless of a modest downward modification of its unit earnings forecast for the 3rd quarter. It cited strength in markets like Boston and New York. Delta’s President Glen Hauenstein likewise stated service demand was returning, and that early bookings for transatlantic markets for the upcoming winter “look really, really motivating.”
Hauenstein, describing the threatening guidance delivered by Spirit and Frontier, stated “We were amazed to see a few of the comments and some of the magnitude of those changes.”
Spirit had already been fighting with weak second-quarter results– see “Spirit Airlines: 5 Things That Failed Last Quarter.”
Executives were speaking this week at a Morgan Stanley financier occasion.
Alaska Airlines reduced its third-quarter profits assistance also however still anticipates a healthy earnings. Others have indicated some modest demand weakening. American Airlines reduced its third-quarter operating margin assistance to 4-5%, from a midpoint of 9%.
But in general, the strong demand and income outlook enjoyed across the industry this spring and summer appears to continue, according to Alaska, Delta Southwest Airlines, United, and others.
Correction: This story has actually been updated to remedy the name of Southwest’s CEO.