Boeing 737 Max grounding continues to hurt Southwest

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The albatross of the Boeing 737 Max grounding continues to hang around the neck of Southwest Airlines.

CEO Gary Kelly on Thursday estimated the Max groundings cost Southwest $828 million in operating income in 2019. Besides the 34 Max planes in its fleet, Southwest had expected that number to increase to 75 by the end of last year along with another 38 deliveries this year, so the grounding represents about a tenth of its fleet, he said during the airline’s Q4 earnings call.

As other carriers have indicated, Boeing’s recent pushback of its approval timeline means Southwest’s current plan to return the Max to service by early June is “unworkable,” Kelly said. Southwest is losing market share due to the grounding but expects to make it up once the aircraft returns to service, he said.

“The timing remains uncertain, but we’re working through all of that right now,” Kelly said in an earnings call. “I’m confident about the Max, and more importantly, our pilots are confident about the Max. We want it to return to service so we can run a great operation and continue to serve our customers very well and better.”

Kelly dismissed recent media chatter that its grounded fleet would force Southwest to make an acquisition, such as JetBlue. “I do not agree that the Max crisis compels us to acquire another carrier, and we would not overpay,” he said.

Southwest Airlines’ fourth-quarter revenue inched up 0.4% to a quarterly record of $5.7 billion, despite lower capacity.

Passenger revenue declined 0.1% to $5.3 billion. That was offset by an 8.8% increase in other revenue. 

Traffic was down 1.5% as capacity declined 0.9%. Load factor declined 0.4 percentage points to 83.1%. Southwest’s average fourth-quarter passenger fare increased 0.3% to $154.94.

Southwest reported net income of $514 million for the quarter, down from $654 million in the fourth quarter of 2018. For the full year, Southwest’s net income was $2.3 billion, down 6.7%.
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Source: Business Travel News

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