Southwest Airlines has warned that the spread of the highly transmissible Delta variant of COVID-19 had impacted bookings and affected its profitability this quarter. The threat posed by Delta also resulted in more flight cancellations, Fox Business said.
Southwest Airlines is the second airline, in less than a week, to warn the variant will weigh on results. Frontier Airlines on Thursday announced it was hoping to break even this quarter because of the virus.
Southwest's move is a turnaround for airline executives' optimistic tone just a few weeks ago, with increasing infections forcing cancellations of trade events like the New York Auto Show planned for later this month.
The Dallas-headquartered Southwest slashed its outlook for the third quarter operating revenue by 3 to 4 percentage points from its prior forecast late in July, the first major U.S. airline to reduce guidance because of the pandemic.
Texas is among U.S. states that have reported the highest increase in new cases and hospitalizations because of COVID-19.
The airline reported decent profit figures last month, but the negative effects of the Delta variant are expected to make profits difficult in the third quarter without counting federal assistance that has given some temporary stimulus in covering labor expenditures.
Airlines have said school and business reopenings in the fall could energize business travel. However, the latest pandemic developments offered a different scenario about whether employees would be allowed to return to the workplace as planned.
U.S. carriers have received $54 billion in federal salary aid since March last year to help them weather the crisis but they also proposed leaves or early retirement programs to employees early in the turmoil to reduce operating costs.
Airline fares were down slightly in July, the U.S. Department of Labor said, a U-turn from the sharp increase in recent months as demand for air travel normalized. The slowdown in travel demand following a period of robust growth adds to the dilemma airlines have been facing.
Shares of Southwest opened lower but remained unchanged during morning trade. The shares rose 9.7% this year in hopes of a rebound in travel demand but underperformed the S&P 500 index's 18% rally.
