US airlines warn of dimming outlook amid delta variant
Summary
- United, Southwest, American and others say surge in Covid-19 cases has hampered travel demand
Several major U.S. airlines downgraded their financial forecasts Thursday, pointing to a slowdown in bookings as the spread of the Delta variant leads to a surge in Covid-19 cases.
United Airlines Holdings Inc., Delta Air Lines Inc., Southwest Airlines Co., JetBlue Airways Corp. and American Airlines Group Inc. all said that rising Covid-19 cases have been hampering demand, a trend that is stymieing hopes for a speedy airline recovery.
United said that it is reducing capacity plans in response to falling demand and that it no longer expects to achieve an adjusted pretax profit this or next quarter if current trends continue. Revenue in the current quarter will likely be about a third lower than the same quarter two years ago, United said.
In July, the airline had projected that the third quarter could bring its first adjusted pretax profit since before the coronavirus pandemic, but an increase in cases has dragged down demand again, the airline said.
Other airlines gave a similarly downbeat account Thursday.
Southwest said falling demand will make profitability challenging in the current quarter. In August, operating revenue came in near the low end of Southwest’s guidance range, the airline said, as more leisure passengers decided to stay home and cancel trips.
Hurricane Ida was another setback, Southwest said, leading to the cancellation of about 2,700 flights. Still, the airline said it is seeing fairly typical booking patterns for dates farther out, including for the holiday season.
“Impacts experienced, thus far, and currently estimated through October 2021, are less severe than experienced during prior waves of rising Covid-19 cases," Southwest said.
As widespread Covid-19 vaccination brought down case loads and fatalities earlier this year, U.S. airlines were hoping for a brisk recovery from the public health crisis that brought much air travel to a standstill when the pandemic hit the U.S. in early 2020.
Virus cases have surged once more as the Delta variant spread, however. As of last weekend, the U.S. was reporting about 164,000 new cases a day, up from under 12,000 in June.
JetBlue “has experienced some softness in bookings and an increase in customer cancellations," the airline said Thursday. It said it still expects to report positive earnings before interest, taxes, depreciation and amortization in the current quarter, but brought down the top end of its Ebitda guidance range to $125 million, from $175 million.
For American Airlines, weaker bookings and higher cancellations will likely bring third-quarter revenue below the company’s previous forecast, the Dallas-based carrier said. It added, however, that it still expects the third quarter to bring its strongest revenue result since the pandemic began.
Delta said that due to a pause in the pace of the business travel recovery, it now expects its adjusted total revenue in September to be near the low end of its prior guidance, which estimated a decline of 30% to 35% compared with the pre-pandemic September-ended quarter in 2019. Booking trends have stabilized in the past 10 days, Delta said.
Write to Matt Grossman at matt.grossman@wsj.com
