Southwest Airlines says omicron will drive a loss in the first quarter, but expects 2022 profit

Passengers wait in line in front of Southwest Airlines counters at Ronald Reagan Washington National Airport on October 11, 2021 in Arlington, Virginia.

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Southwest Airlines expects to lose money in the first quarter, following the omicron variant of Covid-19 injured staff and bookings, but it said profits are on the table in March and the rest of the year.

Southwest’s rivals Delta Air Lines, United Airlines and American Airlines also said earlier this month that they expect the fast-spread variant to further delay a recovery in travel demand, but that reservations for spring and summer were strong.

“Although we made significant progress in 2021, the Omicron variant has delayed the demand improvement we previously expected in early 2022,” said Bob Jordan, Southwest’s executive vice president taking over the reins as CEO on February 1, in a results message. “With COVID-19 cases trending downwards, the worst seems to be behind us and we are optimistic about current bookings and revenue trends for March 2022.”

Airlines had canceled more than 20,000 flights between Christmas Eve and the first week of the year, hit by a combination of bad weather and lack of available crews as omicron spread through staff ranks and nationwide.

Both leisure and business travel reservations are weaker than expected and are likely to reduce operating revenues in January and February by a total of $ 330 million, Southwest said Thursday. For the first three months of the year, Southwest expects revenue of 10% to 15% during the first quarter of 2019, generating $ 5.15 billion.

Southwest and other airlines offered extras to crews to help ease staff shortages, and the Dallas-based carrier said it would extend into February.

The cost is also rising. Southwest said first-quarter spending, excluding fuel, is likely to rise 20% to 24% from 2019, up from an earlier estimate of a 10% increase to 14%. The airline is retiring on its first-quarter capacity plans and expects to recover 91% of its pre-pandemic flights in 2019 compared to an earlier estimate of 94%.

Southwest is like the competitors on a hiring train and has said it expects to add around 8,000 employees this year from 5,000 last year. In its quarterly release on Thursday, Southwest said it would raise starting pay to $ 17 an hour – up from $ 15 an hour it set last year.

Strong holiday reservations helped more than double revenue to $ 5.05 billion in the fourth quarter from $ 2.01 billion in 2020, driving the company to a profit of $ 68 million compared to a loss of $ 908 million in the same period last year.

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