Southwest Airlines says Delta variant is leading travelers to cancel trips
The highly contagious Delta variant has darkened the outlook for Southwest Airlines, one of the largest carriers in the U.S., which said that it may not turn a profit in the third quarter as COVID-19 infections spread.
The revelation, contained in a Wednesday filing with the Securities and Exchange Commission, comes just three weeks after Southwest CEO Gary Kelly called the airline's most recent quarter a "milestone" after turning a profit in June without government assistance.
The airline said Wednesday that it was again profitable in July, but that the recent negative effects of the pandemic on August and September revenue will make profitability less likely in the third quarter if the benefits of temporary salaries and wages relief are excluded.
"The company has recently experienced a deceleration in close-in bookings and an increase in close-in trip cancellations in August 2021, which are believed to be driven by the recent rise in COVID-19 cases associated with the Delta variant," Southwest said in the filing.
The travel industry, including cruise operators and airlines like Southwest, suffered billions of dollars in losses last year as the pandemic halted passengers in their tracks.
Carriers have fared better this year, thank in part to federal pandemic relief. Southwest in July reported a profit of $348 million for its second quarter, boosted by $724 million in government aid. Most economists say the latest COVID-19 wave, which now accounts for nearly all new infections in the U.S., is unlikely to derail the ongoing economic recovery.
But the spike in cases appears to be having an impact on consumer spending as some Americans again begin to avoid risky activities. After rising earlier this year, spending on airlines has edged down in recent weeks amid the spike in COVID-19 cases, according to B of A Securities.
"The slowing in air travel is not just a story for this week: The 2-year growth rate of air travel peaked four weeks ago and has taken a turn lower, potentially reflecting the risks from the Delta variant," analysts with the banking firm wrote in a recent report.
