Aussies will have to consider alternative airlines when flying between US states after the country’s major carrier Southwest Airlines decided to cut services.
Southwest Airlines said Thursday it will slash 2000 jobs and close operations at four airports after warning of higher costs and slower revenue growth because of a drop in new aircraft deliveries from Boeing.
The Dallas-based airline said it will receive just 20 aircraft this year from Boeing, down from 46 estimated in March, as the aviation giant reels from a safety crisis sparked by a January mid-air cabin panel blowout on an Alaska Air flight, the New York Post reports.
Regulators have put a cap on production of the 737 MAX, but the company is not hitting even that level, Reuters reported this month.
“The recent news from Boeing regarding further aircraft delivery delays presents significant challenges for both 2024 and 2025,” Southwest CEO Bob Jordan said in the company’s first-quarter financial results statement.
Southwest plans to stop flying to Syracuse, New York; Cozumel, Mexico; Bellingham, Washington and George Bush Intercontinental Airport in Houston, where the airline’s major operation is at smaller Hobby Airport.
The company also said it expects to end this year with 2,000 fewer employees than it had at the start of the year.
The headcount reduction is part of a larger cost-cutting initiative to offset its recent losses, which will also see Southwest limiting its voluntary time-off programs.
Shares of Southwest fell nearly 7 per cent on Thursday, closing at $US27.26 ($41.82)
Southwest, which operates an all-Boeing fleet, now expects its total seat capacity to rise four per cent year-on-year in 2024, compared with six per cent growth estimated earlier.
The company said reductions in schedules will not only result in a slower-than-expected growth in revenue this year from a year ago, but also translate into higher-than-expected operating costs.
To mitigate the impact, Southwest said it is trying to enhance productivity and control discretionary spending.
Aside from terminating service to the four airports, Southwest will also cut capacity in markets like Chicago and Atlanta.
Southwest reported an adjusted loss of 36 cents a share in the first quarter. Analysts on average were expecting a loss of 34 cents, according to LSEG data.
Southwest was the first low-cost, no-frills airline, known for its single economy class cabin and no seating assignments.
But while every other airlines have tacked on fees for everything from checking baggage, reserving a seat assignment and upgrading to economy plus, Southwest has stuck to its one-size-fits-all approach with one exception, charging extra to board the plane earlier.
Jordan said the company is rethinking those policies.
“We’re looking into new initiatives, things like the way we seat and board our aircraft,” Jordan told CNBC after the company’s disappointing earnings report.
Southwest doesn’t even charge passengers for their first two checked bags.
“Only months ago they would have been dismissive of the idea of charging more for extras,” Craig Jenks, head of New York-based consulting firm Airline/Aircraft Projects Inc. told The Post.
“The idea of ‘I’m a big shot and need more leg room’ is against what Southwest has always stood for.”
Southwest has also reduced the number of transcontinental flights – or those that are longer than five hours – it operates to 1.3 per cent of its seats from 4.4 per cent in 2017.
The airline’s average flight time is two hours, 10 minutes — compared to JetBlue’s three hours, 20 minutes and Alaska Airlines’ three hours, 40 minutes, according to Jenks.
“Southwest can’t attract wealthy, higher paying passengers because it doesn’t have these levers that other airlines are pulling,” Jenks said.
American said it lost $312 million as labor costs rose 18 per cent, or nearly $US600 million ($920 million)
The airline said it expects to return to profitability in the second quarter — a busier time for travel — and post earnings between $US1.15 and $US1.45 per share. Analysts expect $US1.15 per share, according to FactSet. The first-quarter loss amounted to 34 cents per share excluding special items, which was worse than the loss of 27 cents per share forecast by analysts.
This article originally appeared on the New York Post and was reproduced with permission