Aug.11 (Reuters) – Southwest Airlines Co (LUV.N) on Wednesday warned that the spread of the Delta variant of COVID-19 has affected bookings and increased cancellations, hurting its chances of profitability this quarter.
The rapid rise in cases of the variant has pushed hospitalizations in the United States to a six-month high, prompting governments in regions like Hawaii to reimpose restrictions and threatening a revival in travel demand. Read more
Dallas-based Southwest has cut its third-quarter operating revenue forecast by three to four percentage points from its earlier forecast released just three weeks ago, the first major U.S. carrier to cut its forecast in reason for the variant.
The earnings warning marked a turnaround from the airline’s optimistic statement last month that it would remain profitable for the remainder of 2021.
Low-cost airline Frontier Airlines (ULCC.O) also lowered its guidance for the third quarter last week and warned that the Delta variant was hurting demand.
While analysts expect other airlines to revise their forecasts downward as well, analysts at Raymond James have noted expectations that new coronavirus cases could peak and begin on a downward trajectory soon.
Southwest shares opened lower but held steady in morning trading. They rose 9.7% this year in hopes of a recovery in travel demand, but underperformed the 18.1% increase in the benchmark S&P 500.
The carrier maintained its unit cost outlook for the quarter.
The southwest had been one of the main beneficiaries of the easing of the coronavirus brakes, as it primarily caters to the domestic market.
But his home base in Texas, where Governor Greg Abbott banned mask warrants and opposed COVID-19-related trade restrictions, is among the US states with the largest increases in new COVID cases. 19 and hospitalizations.
Reporting by Abhijith Ganapavaram in Bengaluru and Tracy Rucinski in Chicago, additional reporting by Sanjana Shivda; edited by Sriraj Kalluvila, Aditya Soni and Jonathan Oatis
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