Southwest, Jetblue raise guidance for summer travel
The major airlines aren't sounding the alarm on the economy yet.
Both Southwest Airlines LUV and JetBlue JBLU raised their quarterly guidance on Thursday, citing strong demand heading into the critical summer travel season. Both upward revisions came just weeks after the companies reported their forecasts last month.
The company said in a filing Thursday that JetBlue's operational performance has improved steadily since April. Bookings are exceeding Company expectations, and the demand environment continues to be strong. JetBlue said that the sales for June are shaping up to be better than earlier months in the quarter. For the second quarter ending June 30, revenue is likely to be above the high-end of previous guidance for a range between 11% and 16% increase compared to 2019, according to JetBlue. The available seat miles ASM, a closely watched metric for airlines, will likely grow between 2% and 3% over 2019 levels, compared to previous guidance for flat to up 3%.
The optimistic forecast stands in stark contrast to the less rosy outlooks issued by companies outside the travel industry.
The picture of an economy softening more quickly than predicted by retailers such as Walmart WMT Target TGT and Abercrombie Fitch ANF. The market slide last week was extended further after Snap SNAP slashed its own guidance earlier this week amid a macroeconomic environment it said had deteriorated further and faster than anticipated. The airlines suggest that there have been pockets of strength even in the midst of these concerns, as consumers seem willing to spend on travel that hadn't been accessible at the peak of the epidemic. Southwest expects operating revenue to grow between 12% and 15% for the second quarter compared to 2019 due to the fact that it raised its guidance on Thursday. It had previously seen an increase of between 8% and 12%.
The Company continues to experience strong load factors and an increase in bookings for summer travel, according to a Thursday filing by the airline.
The forecasts from Southwest and JetBlue were based on the upbeat outlooks issued by other travel companies in recent weeks, which have all pointed to pent-up demand for travel ahead of the summer.
The demand environment has continued to improve, according to the guidance provided by United Airlines UAL earlier this month. Anthony Capuano, Marriott's MAR CEO, told Yahoo Finance he expected a blockbuster summer, while Airbnb ABNB told investors that they were already seeing substantial demand for summer travel in early May.
As supply-side concerns like rising energy prices remain, each of these outlooks has highlighted the strength of demand.
The increase in the second quarter of 2022 operating revenue guidance is due to continued passenger yield strength, which has more than offset the increase in the second quarter of 2022 fuel price projection, Southwest said in its filing.
The retailers' grim guidance has shown a greater resilience in demand than supply, according to the details. Walmart, Target and Abercrombie Fitch each exceeded estimates for first-quarter revenue, while cutting full-year earnings forecasts due to expectations that they would have to absorb rising transportation, labor, and other input costs, and possibly slash prices on products they've stockpiled over the past year.
Peer retailer Macy's M summed it up succinctly in its earnings report Thursday morning.
Our customers continued to shop while macroeconomic pressures on consumer spending increased during the quarter.
Emily McCormick is a reporter for Yahoo Finance.