The Delta variant of Covid-19 is weighing on Southwest Airlines’ bottom line.
The carrier said in a regulatory filing Wednesday that customers this month have been booking fewer flights and are increasingly canceling the trips they’ve already booked. That prompted Southwest to lower its operating revenue estimates for the month to 15% to 20% below what it took in in August 2019. Previous estimates called for a 12% to 17% decline from two years ago.
Southwest (LUV) said it was profitable in July, but the “recent negative effects” of the pandemic will make turning a profit difficult in the third quarter. The airline expects September revenue will be down 15% to 25% compared to the same month in 2019, but said demand for Labor Day travel “remains healthy, thus far.”
Shares of the airline were flat Wednesday.
The warning is a stark turn of events for Southwest, which predicted a few weeks ago that it would be profitable in the third and fourth quarters based of strong booking trends for leisure travel. Southwest’s president Tom Nealon said in July that so far “we have not seen any impact from the Delta variant.”
The highly contagious coronavirus variant is impacting overall air travel. As of July 3, domestic air travel, measured by tickets issued by US travel agencies and online booking companies, stood at just 3% below 2019 levels, according to the CNN Business Economic Recovery Dashboard. However, domestic air travel has since slowed, and as of July 23 was down 22% compared with the same point in 2019.
