Major US carrier Southwest Airlines lowered its revenue outlook for the second quarter on 26 June as it seemingly acknowledged that it did not react to the current demand environment quickly enough.
The Dallas-based carrier disclosed in a filing with the US Securities and Exchange Commission that it is expecting revenue per available seat mile (RASM) to decline 4-4.5%, versus its previous expectation of a 1.5-3.5% decrease.
“The reduction in the company’s RASM expectations was driven primarily by complexities in adapting its revenue management to current booking patterns in this dynamic environment,” Southwest says.
“Despite lowered expectations, the company continues to expect an all-time quarterly record for operating revenue in the second quarter.”
The company has recently taken heat from investors – such as Elliott Investment Management, which holds 11% of Southwest’s outstanding stock – that argue it has been too slow to adjust to the post-Covid-19 airline industry. The investment firm is calling for the resignation of chief executive Bob Jordan and executive chair Gary Kelly.
Milwaukee-based Artisan Partners, which holds a 1.8% stake in Southwest, is also pressuring the company’s board to ”reconstitute itself and upgrade the company’s leadership”.
Annual revenue has been declining since the pandemic and Southwest lost $231 million during the first quarter amid surging costs and Boeing 737 Max delivery delays.
Southwest maintains that it has a winning strategy to return to profitability, details of which will be shared alongside its second-quarter financial results and during its investor day in September.
“The company remains intensely focused on improving its financial results and creating value for its shareholders as it continues to develop and implement its portfolio of strategic initiatives aimed at enhancing the customer experience; delivering operational excellence; creating new and meaningful revenue opportunities; expanding margins; and achieving return on invested capital well above the company’s weighted average cost of capital,” Southwest says.
Touting its operational performance during the second quarter, Southwest reports a quarter-to-date completion factor of 99.5% “despite challenging weather in Texas and Florida”.
