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Southwest Air Says COVID Spread to Impede Profitability Effort

'The recent negative effects of the pandemic will make it difficult for the company to be profitable in third quarter 2021,' Southwest Air said.
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Southwest Airlines  (LUV) - Get Southwest Airlines Co. Report shares fell Wednesday after the carrier said the spread of the delta variant of COVID throws into question whether it can generate profit in the third quarter.

The stock recently traded at $49.85, down 2.5%.

“The company has recently experienced a deceleration in close-in bookings and an increase in close-in trip cancellations in August, which are believed to be driven by the recent rise in COVID-19 cases associated with the Delta variant,” Southwest said in an SEC filing.

“Based on the assumption that COVID-19 cases remain elevated in the near-term and current revenue trends in August continue into September, the company's outlook for third-quarter operating revenues has worsened by an estimated three to four points from its previous outlook three weeks ago.”

Southwest now expects operating revenue to decline 15% to 20% in the third quarter compared with 2019, with August revenue falling by the same magnitude.

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As for profit, the company "was profitable again in July 2021,” it said.

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“However, the company believes the recent negative effects of the pandemic on August and September revenue trends will make it difficult for the company to be profitable in third-quarter 2021, without taking into account the benefit of temporary salaries and wage cost relief provided by payroll support program proceeds.”

Southwest isn’t the only airline suffering. Total U.S. airline ticket sales slipped in the past week, and ticket prices fell 51.4% from 2019, according to Airlines Reporting Corp., Bloomberg reports.

Last month, TheStreet.com Founder Jim Cramer analyzed the impact of Southwest’s second-quarter earnings.