Southwest Airlines first-quarter profit hit by 737 MAX grounding

April 25, 2019

(Reuters) – Southwest Airlines Co reported a 16 percent drop in quarterly profit on Thursday, saying a U.S. government shutdown, maintenance disruptions and the grounding of its Boeing 737 MAX jets knocked $150 million off its bottom line.

Dallas, Texas-based Southwest, the world’s largest MAX operator with 34 jets in its fleet and dozens more on order, said it lost more than $200 million in revenue during the quarter, above its previous estimate of $150 million.

The No.4 U.S. airline has canceled thousands of flights since the 737 MAX was grounded worldwide in March following two fatal crashes, in addition to cancellations due to bad weather and unscheduled maintenance disruptions as it worked out a new labor contract with its mechanics union.

The low-cost carrier has removed the fuel-efficient, longer-range MAX from its flying schedule through Aug. 5 as it waits for Boeing Co to submit a software fix and new training guidelines to global regulators for review.

“Flight cancellations are expected to drive unit cost pressure for the duration of the MAX groundings,” Southwest Chief Executive Officer Gary Kelly said.

On an adjusted basis, the company earned 70 cents per share in the first quarter, beating estimates of 61 cents per share, according to IBES data from Refinitiv.

Total operating revenue at the airline, which launched a service to Hawaii from California last month, rose 4 percent to $5.15 billion.

(Reporting by Tracy Rucinski in Chicago and Rachit Vats in Bangalore; Editing by Bill Rigby and Shounak Dasgupta)

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