DALLAS (AP) — Southwest Airlines will limit hiring and suspend service to four airports as it grapples with weak business performance and delays in introducing new planes from Boeing Co.
Southwest Airlines and American Airlines reported first-quarter losses Thursday. Demand for travel, including for business flyers, remains strong, but airlines are grappling with rising labor costs and aircraft delivery delays are limiting their ability to add flights.
Southwest Airlines announced a loss of $231 million. Chief Executive Officer Robert Jordan said the airline was acting quickly to “cope with the underperformance,” including slowing hiring and asking employees to take time off.
The Dallas-based airline said it expects to end the year with 2,000 fewer employees than at the beginning of the year.
Southwest Airlines will also suspend service to Cozumel, Mexico, and four airports in Mexico. Syracuse, New York. Bellingham, Washington. At Houston's George Bush Intercontinental Airport, the airline's primary operations are at the smaller Hobby Airport.
The closures will allow airlines to focus on more profitable locations and deploy smaller fleets than planned. Southwest Airlines said it expects to get only 20 new 737 Max 8 planes from Boeing this year, down from the 46 it expected a few weeks ago. Retiring fewer aircraft will offset some of the shortfall.
Boeing has been plagued by production delays since a door plug on an Alaska Airlines Max 9 exploded in January, leaving airline customers frustrated.
Dallas-based Southwest Inc. said its loss, excluding special items, was 36 cents per share. That was slightly worse than the 34 cents per share loss that Wall Street had expected.
Revenue rose to $6.33 billion, below analysts' expectations of $6.42 billion.
American Airlines said it lost $312 million as labor costs rose 18%, or nearly $600 million. The company said it expects to return to profitability in the second quarter, during the peak travel season, with earnings per share of $1.15 to $1.45. Analysts surveyed by FactSet expected earnings of $1.15 per share.
Excluding special items, the company's first-quarter loss was 34 cents per share, worse than analysts' expectations of a loss of 27 cents per share.
Sales were $12.57 billion.
Chief Executive Officer Robert Isom said American Airlines is less affected by Boeing's problems because it has already taken in hundreds of new planes in recent years. American Airlines has ordered the Boeing Max 10, a larger model that has not yet been certified by the Federal Aviation Administration, but those planes are not expected to start appearing until 2028.
“If they don't come to an agreement, we're making sure we're protected,” Isom told CNBC. He declined to say that American Airlines would switch Boeing's orders to rival Airbus, saying only: “We'll take care of it.”
In premarket trading, Southwest shares fell 9%, while American shares rose 3%.
