United Airlines Holdings Inc., Southwest Airlines Co. and other U.S. carriers said that a surge in coronavirus infections is likely to hamper their recovery, with customer bookings slowing in recent weeks.
United projected an adjusted pretax loss this quarter and next—contrary to its previous forecasts—if current trends continue. Southwest and American Airlines Group Inc. said third-quarter revenue will fall more than previously expected from the pre-pandemic levels of two years ago.
“The variant has caused a bit of a pause on some segments of our business, particularly business travel,” Delta Air Lines Inc. Chief Executive Officer Ed Bastian said at a Cowen transportation conference Thursday, echoing commentary from other airlines. Corporate demand remains about 40% of the 2019 level, he said.
But the outlooks weren’t universally gloomy: Carriers generally said that bookings remain strong for the upcoming holiday period. And Delta stuck by its projection for a third-quarter profit.
Airline shares advanced, with the biggest carriers led by American’s gain of 3.4% to $19.77 at 9:58 a.m. in New York. A Standard & Poor’s index of nine carriers had climbed 4.5% this year through Wednesday.
The airlines’ commentary extended concerns that the expansion of cases tied to coronavirus delta variant could derail a global travel recovery after damping a surprisingly strong summer travel season in the U.S. The pandemic’s persistence has prompted a growing number of corporations, including Apple Inc., Ford Motor Co. and Amazon.com Inc., to delay returning workers to offices and resuming business travel. Such activities had been a key factor in airline industry views that sales would improve as the year winds down.
Southwest had been the first to sound the alarm about the surge in variant cases, saying on Aug. 11 that slowing demand and a rising number of trip cancellations was reducing revenue and would make it difficult to report a third-quarter profit. Within weeks, it was joined by American, JetBlue Airways Corp., Alaska Air Group Inc. and other carriers.
On Thursday, Southwest projected that September revenue would be down as much as 30% from two years earlier, compared with an earlier estimate of as much as 25%. Third-quarter revenue will slide as much as 20%, toward the low end of its previous outlook, the carrier said in a regulatory filing. Hurricane Ida and its lingering impacts will end up forcing the cancellation of nearly 2,700 flights in the third quarter. Southwest’s fourth-quarter capacity will be about 5% below two years earlier, rather than level, as previously forecast.
American expects third-quarter revenue to be down as much as 28% from two years earlier as demand continues to slow, compared with earlier guidance for a drop of 20%. Third-quarter pretax margin, excluding special items, will be between minus 10% and minus 14%, compared with an earlier expectation of minus 3% to minus 7%.
JetBlue forecast that third-quarter revenue would fall between 6% and 9% from 2019, compared with a previous estimate of down 4% to 9%. The softness in bookings has extended into the fourth quarter, although leisure demand for the peak holiday periods “will hold up relatively well,” the carrier said in a securities filing.
Business Travel
Delta offered a less-cloudy forecast, affirming its profit outlook for the third quarter, though it didn’t do the same for the fourth. Bastian projected that travel would be back to pre-variant levels in the next 30 days. But many companies have slowed plans for employees to return to offices by as much four months, he said.
“The pace of business travel recovery has paused as companies delay or scale down initial office re-openings,” Delta said.
Hopes for a return of vital international business travel also have been diminished, with European Union countries reimposing restrictions on nonessential travel from the U.S. as virus cases rise. The U.S. also has retained restrictions on inbound travelers from many countries.
The airlines had benefited from a jump in summer leisure travel by consumers who spent more than a year staying close to home and then rushed to take vacations or reunite with family and friends.
Southwest said that managed business-travel bookings stalled in August after several months of sequential growth and should remain relatively stable in September and October.
