American and Southwest Post Profits as the Airline Industry Recovers
Both airlines said they expected to do even better in the final three months of the year, lifted by corporate, international and holiday travel.
American and Southwest post profits as the airline industry recovers.
The Southwest Airlines check-in area at Midway International Airport in Chicago. The airline industry has shown progress despite the spread of the Delta variant of the coronavirus.Credit…Tannen Maury/EPA, via Shutterstock
Oct. 21, 2021, 8:25 a.m. ET
American Airlines and Southwest Airlines reported profits for the three months ending in September, reflecting the industry’s recovery despite the spread of the Delta variant of the coronavirus. But the airlines aren’t entirely out of the woods: Both would have reported losses were it not for federal pandemic aid.
Still, the financial results show that the industry is on the mend as travel steadily resumes and both American and Southwest said they expected to do even better in the final three months of the year, lifted by corporate, international and holiday travel.
“We made good progress in our pandemic recovery in third quarter 2021, and I expect more in fourth quarter,” Gary Kelly, Southwest’s chief executive, said in a statement. “I’m very excited about the demand recovery and our prospects for 2022.”
Southwest reported a profit of $446 million for the third quarter, with revenue of $4.7 billion. The Delta variant robbed the airline of an estimated $300 million in revenue over the summer, but Southwest also suffered from operational challenges, including a three-day stretch of widespread flight delays and cancellations in June that was echoed earlier this month.
“Available staffing fell below plan and, along with other factors, caused us to miss our operational ontime performance targets,” Mr. Kelly acknowledged. As a result, the airline has reined in plans for 2022 as it looks to hire 5,000 people before the end of this year. Mr. Kelly said Southwest was more than halfway toward that goal.
Ticket sales have started to improve in recent weeks, but the Delta variant and the operational challenges will weigh on Southwest’s fourth-quarter results. The airline said the virus has cost it an estimated $40 million this month, while a dayslong stretch of disrupted flights that ended last week will cost it $75 million. The rest of the quarter looks strong, though, with trends in holiday ticket sales in line with 2019.
American, which reported a profit of $169 million bolstered by federal aid, also said it expected strong holiday demand, which the airline expects will help it end the fourth quarter with about 80 percent as much revenue and nearly 90 percent as many seats sold as in the final three months of 2019.
American received nearly $1 billion in federal aid during the third quarter to help pay employee salaries, while Southwest received $763 million.
Both airlines said they were optimistic about the recovery in corporate travel and a rebound in international travel with the United States expected to ease travel restrictions early next month. Delta and United, which both recently reported profits for the same quarter, have also expressed optimism for the months ahead, though rising fuel costs could weigh on those improvements.