Southwest Air Cuts Revenue Outlook as CEO Fends Off Activist
A Southwest Airlines airplane at Baltimore-Washington Airport in Baltimore, Maryland, US.
(Bloomberg) -- Southwest Airlines Co. reduced its estimate for unit revenue in the second quarter, a sign of ongoing challenges at the carrier as it fends off an activist push for a management overhaul.
The carrier expects revenue per available seat mile to fall as much as 4.5% in the current quarter, Southwest said Wednesday in a regulatory filing. It had previously expected a decline of no more than 3.5%.
Southwest attributed the pared outlook to “complexities in adapting its revenue management to current booking patterns,” according to the filing.
The reduction is an unwelcome development for Southwest Chief Executive Officer Bob Jordan as he faces demands for new leadership by some investors including activist Elliott Investment Management, which disclosed a $1.9 billion stake in Southwest earlier this month.
“Any way you dice it, Southwest continues to struggle in the current environment with more moderate leisure demand after years of strength,” Melius Research analyst Conor Cunningham said in a client note.
Southwest’s shares fell 3.8% as of 9:42 a.m. in New York, paring a larger premarket decline.
Despite demand at record levels, domestic travel growth in the US is slowing after a rapid rebound following the pandemic. Carriers have responded by dialing back plans to increase flying while also offering discounts to lure customers, putting a ceiling on higher fares.
The carrier had already begun rethinking long-held aspects of its business model, such as potentially abandoning unassigned seating and offering more premium options to adapt to the demands of today’s customers.
(Updates with shares, analyst comment from third paragraph.)
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