Hurricanes and earthquake see Southwest Airlines revise revenue guidance downward

Along with several other airlines, Southwest Airlines (Southwest) has had to readjust its third-quarter revenue projection. In Southwest’s case, the hurricanes which devastated parts of Florida and Texas, while leaving the whole of Puerto Rico without power, together with the recent earthquake which has destroyed swathes of Mexico, has forced the American carrier to cut its revenue projection. It is now predicting a third-quarter operating unit revenue (an airline’s revenue in relation to its overall flight capacity), to be flat to down 1%, compared with a forecast of down 1% to “slightly up” given earlier this month. Prior to this, Southwest expected a 1% gain in the key metric.
United Airlines has already lowered its projection for Q3 revenue subsequent to the effects of Hurricane Harvey. American Airlines has also cut its revenue forecast as a result of the devastation caused by Hurricane Irma, including the closure of forty airports in Florida and the Caribbean. The current adjustments come hot on the heels of a ‘network issue’ which has seen flights across the world suffering from flight delays. The problem centered on a ‘technical hitch’ at a flight booking system run by Amadeus IT Group, according to a report by Bloomberg.
According to Southwest, over 5,000 flights were canceled up to September 27, as a consequence of the natural disasters. In financial terms, this has cost the airline somewhere in the region of US$100 million. In addition, the carrier points to the “current industry revenue environment” as influencing its decision to lower expectations for the third quarter. With higher fuel costs and lower fares primarily responsible, Southwest’s position has not been helped as a result of the price war it is experiencing with Spirit Airlines at some of the country’s largest hubs.