Southwest, JetBlue Give Upbeat Revenue Outlooks Despite Inflation Worries

By Reuters
Reuters
Reuters
May 28, 2022 Updated: May 28, 2022

Southwest Airlines Co. and JetBlue Airways Corp. on Thursday gave upbeat revenue forecasts for the current quarter on strong travel demand, despite concerns that rising inflation may weigh on consumer spending.

U.S. airlines have been buoyed, and in some cases surprised, by how quickly travel snapped back from the depths of the COVID-19 pandemic, leaving them struggling to add capacity in part due to staff shortages.

As such, they have been able to raise ticket prices that have diminished the impact of higher fuel prices and elevated labor costs.

“The improvement in the company’s second quarter 2022 operating revenue guidance is primarily attributable to continued passenger yield strength,” Southwest said in a filing.

However, decades-high inflation has darkened the outlook for the U.S. economy as consumers pull back on discretionary spending, leading to concerns that travel demand may take a hit.

Southwest said it now expects current-quarter operating revenue to rise 12 percent to 15 percent versus pre-pandemic levels. It had earlier forecast an 8 percent to 12 percent rise.

JetBlue, which is locked in a takeover battle with Frontier Group Holdings Inc. for rival Spirit Airlines Inc, said it expects revenue “at or above high-end of previous guidance” of an 11 percent to 16 percent rise.

Both the carriers said they expect a strong summer season.

Southwest added it is on track to report “solid profits” for the quarter and for the rest of 2022.

The Texas-based carrier, however, said it expects available seat miles, or capacity, for the quarter to fall about 7 percent versus pre-pandemic levels.

JetBlue it expects capacity to be up 2 percent to 3 percent, up from its prior expectation of a flat to 3 percent rise, though the carrier flagged industry-wide weather and air traffic control-related disruptions.

Reuters