Although many airlines have expressed optimism regarding a return to sustained profitability, the Delta variant will likely stymie their rebound. Especially if it isn't contained effectively.
Southwest Airlines Co became the first big U.S. carrier to warn of a hit from the more infectious Delta variant of the coronavirus on Wednesday, saying it may not be profitable in the current quarter.
Shares of the company were down 2% in premarket trading as it said the spread of the more infectious variant had hit bookings and increased cancellations in August.
The warning marked a u-turn from the airline’s statement last month that it would remain profitable for the rest of 2021. It also weighed on shares of rivals Delta Airlines Inc, American Airlines Group Inc and United Airlines Inc, which lost more than 1% each.
The rapid surge in cases of the variant has pushed U.S. hospitalizations to a six-month high, prompting governments in areas such as Hawaii to re-impose restrictions and threatening a recovery in travel demand that helped airlines bounce back.
Southwest also forecast its third-quarter operating revenue to be down 15% to 20% versus 2019, a cut of about three to four points from its prior outlook issued just three weeks ago. (https://bit.ly/3s94erL)
But the airline maintained its unit cost outlook for the quarter.
Last week, Frontier Airlines also lowered its third-quarter forecast and warned the Delta variant was hurting demand.
(Reporting by Abhijith Ganapavaram and Sanjana Shivdas in Bengaluru; Editing by Sriraj Kalluvila, Aditya Soni)
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Photo credit: A Southwest Airlines plane not long after takeoff Eric Salard / Wikimedia Commons