Soaring labor costs at Southwest Airlines overshadow record revenue as summer travel revs up
Southwest Airlines is reporting a $683 million profit for the second quarter, and revenue is a quarterly record as planes are packed during the peak summer travel season
DALLAS — Southwest Airlines said second-quarter earnings dropped 10% to $683 million as labor costs soared, offsetting record revenue at the start of the peak summer travel season.
The airline also warned Thursday that a key revenue ratio will drop and non-fuel costs will rise in the third quarter.
The shares fell more than 9% in afternoon trading. It marked the stock's biggest one-day percentage decline since early 2020, shortly after the COVID-19 pandemic crippled air travel.
Southwest said that revenue for every seat flown one mile — a closely watched ratio in the airline business — fell 8.3% in the second quarter and will drop by between 3% and 7% in the third quarter, compared with the same periods last year.
That outlook “will amplify concerns around slowing domestic air travel demand,” said Cowen airline analyst Helane Becker.
A report earlier this week from Alaska Airlines fanned worries that demand for air travel — especially within the United States — might finally be cooling after recovering strongly from the pandemic. Southwest and Alaska both operate mostly domestic flights, and they are benefitting less than bigger rivals Delta, United and American from the boom in international flying.
Southwest CEO Robert Jordan sought to assure the market, saying that more than half of the decline in the second-quarter revenue ratio could be explained by additional money that Southwest booked a year ago. Southwest recognized revenue based on the expectation that some pandemic-era vouchers and credits would not be used before they expired. Southwest has
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