TravelUS airlines flag high fuel costs, Southwest's August bookings...

US airlines flag high fuel costs, Southwest’s August bookings disappoint, ET TravelWorld

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<p>LOS ANGELES, CALIFORNIA - AUGUST 31: People view a Southwest Airlines plane landing from a park next to Los Angeles International Airport (LAX) on August 31, 2023 in Los Angeles, California.</p>
LOS ANGELES, CALIFORNIA – AUGUST 31: People view a Southwest Airlines plane landing from a park next to Los Angeles International Airport (LAX) on August 31, 2023 in Los Angeles, California.

Southwest Airlines on September 6 flagged softer August leisure bookings and joined two other US airlines in warning of higher fuel costs in the third quarter due to a jump in crude prices.

The largest US domestic carrier said August bookings were at the lower end of its expectations, in part due to seasonal trends, but maintained that overall leisure demand and yields remain healthy.

Shares of Southwest closed 2.6% lower at USD 29.97.

The forecast comes as early signs emerge of domestic travel demand weakening, with inflationary pressures hurting consumers even as carriers hand out costly contracts to retain workers.

SAS airline to boost capacity after first quarterly profit since 2019

The airline, which has been under bankruptcy protection since July 2022, swung to a pretax profit of 457 million Swedish crowns (USD 42 million) in its third quarter to July 31 from a 1.99 billion crowns loss a year earlier. The long-struggling Nordic carrier has struggled to recover after the COVID-19 pandemic, while labour issues, travel disruption and high costs have hampered efforts to swiftly complete its restructuring process.

United Airlines and Alaska Air Group also warned of higher fuel costs in the current quarter as crude oil prices rose for a third straight month in August, amid signs of tightening supply. In a regulatory filing, United said jet fuel prices have climbed over 20% since mid-July.

The carrier also said it had no imminent plans to move its headquarters to Denver from Chicago after buying 113 acres of land there. Finance Chief Gerald Laderman at the TD Cowen Transportation Conference said the first order of business is the expansion of the flight training center in Denver.

Southwest said it continues to forecast a “solid (third-quarter) profit”, but trimmed its expectations for revenue per available seat mile – a proxy for pricing power – to a 5% to 7% fall, compared with a 3% to 7% fall forecast earlier.

Alaska Air expects a quarterly adjusted pre-tax margin of 10% to 12%, lower than its prior expectation of 14% to 16%.

US airlines do not generally hedge against fuel costs, making them vulnerable to price swings.

“The relatively quick up move in fuel has given the industry little time to respond through fares,” Citi Research analyst Stephen Trent said in a note.

  • Published On Sep 7, 2023 at 03:30 PM IST

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