Southwest Airlines LUV CEO Gary Kelly said the airline would have seen a handsome profit in the third quarter but the late summer spike in COVID - 19 cases led to a loss as passengers stopped booking flights.
I am very hopeful we are on the right trajectory here but it may be 2022 before we see sustained profitability, Kelly told Yahoo Finance Live.
Here are the main results from the Q3 report, compared to consensus estimates compiled by Bloomberg:
Southwest posted an adjusted loss of $135 million or $0.23 per share in the third quarter, beating Wall Street estimates. Revenue also came in stronger than expected at $4.7 billion, down 17% compared to the same quarter in 2019.
So just moving from second to third quarter and seeing that increase in demand was really, really encouraging. And it's continuing here into the fourth quarter, even though we've moderated some of our capacity plans in fourth, I'm still expecting a good healthy revenue performance, Kelly said.
Jet fuel prices have risen 60% year-to-date and Southwest warned that they pose a $100 million cost headwind for Kelly in the fourth quarter. Other airlines have issued the same warning with Delta Air Lines DAL and United Airlines UAL considering increasing ticket prices.
Kelly said Southwest will continue to be America's low fare policeman, but added, I can't really tell you what our future pricing actions might be other than we want to keep our costs low and keep our fares low. Southwest said leisure and business travel demand continue to improve with renewed momentum in bookings as people plan their holiday travel. The airline is halfway to its goal of hiring 5,000 new employees to meet that demand, but Kelly says balancing capacity with staffing poses some challenges.
We're seeing a little bit higher attrition, higher access to leaves a little bit higher absenteeism. So we just need to be mindful of that, Kelly pointed out.
Southwest said it was aggressive with its capacity plans in the third quarter pushing close to pre-pandemic levels. But staffing shortages magnified by bad weather and air traffic slowdowns led to Southwest canceling thousands of flights two weeks ago and upsetting thousands of passengers.
While not part of the Q3 metrics, Southwest said its October operating revenue face two headwinds. A $75 million charge related to customer refunds and an estimated $40 million negative impact due to the lingering effects of Delta variant. Kelly said things are looking better as holiday travel bookings fall in line with where they were in 2019. We just have to get out there and win customers over every day, he said. Newsweek named Southwest No. 2. And when we goof up, we apologize and we do everything we can to hold on to them and get them to come back, Kelly said.
Adam Shapiro is co-anchor of Yahoo Finance Live from 3 pm to 5 pm.