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Southwest Airlines Cuts Revenue Forecast Amid Shifting Booking Trends
Southwest Airlines has revised its second-quarter revenue forecast downward, citing complexities in adapting to current booking trends in the evolving market environment. The airline now anticipates a decrease in revenue per available seat mile by 4% to 4.5% in the second quarter compared to the previous year, a significant shift from the initial estimate of 1% to 0.5%. This adjustment has led to a decline in the company's shares in premarket trading.
Despite the revised forecast, Southwest still expects to achieve record quarterly operating revenue in the second quarter. However, the airline's unit expenses, excluding fuel, are projected to increase by up to 7.5%, contrary to the prior expectation of no change. Additionally, Southwest now foresees a capacity increase of up to 9%, a departure from the previous forecast of flat growth.
The airline industry is facing challenges due to rising costs and expanded capacity, which have impacted ticket prices and profits. While some airlines like Delta ($DAL) and United ($UAL) are benefiting from the resurgence of international travel and increased passenger spending on upgraded seating options, Southwest is facing pressure from activist investor Elliott Management. The hedge fund has called for a leadership change at Southwest, criticizing the company's performance under CEO Bob Jordan and Chairman Gary Kelly.
Despite this pressure, Southwest remains confident in its leadership team and is exploring new revenue strategies such as offering seating assignments or premium seating, signaling a potential shift from its traditional business model that has historically been successful over the past five decades.
Original Article: https://www.cnbc.com/2024/06/26/southwest-airlines-cuts-revenue-forecast.html
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