Southwest Airlines is in trouble

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Major U.S. carrier Southwest Airlines is facing a huge shake up after posting poor first-quarter financial results this week.
The Boeing Issue The blame has been largely laid on Boeing, with problems highlighted following a midair door blowout on an Alaska Airlines flight in early January.
Earlier this month, an engine cowling on a Southwest operated Boeing 737-800 fell off during take off from Denver airport.
The company is now only expected to receive 20 new Boeing aircraft this year—down from 46.
Operational Changes As part of its cost-cutting plans, Southwest announced on Thursday that it would end all services at Bellingham International Airport, Cozumel International Airport, Houston’s George Bush Intercontinental Airport, and Syracuse Hancock International Airport.
Capacity reductions will also be implemented in Hartsfield-Jackson Atlanta International Airport and Chicago O’Hare International Airport.
The last time Southwest dropped operations at an airport was in 2019, when it ceased all operations out of New Jersey’s Newark Liberty International Airport.
Earlier this year, Southwest agreed an immediate 29 percent salary increase with its 11,000 pilots, ending nearly three years of negotiations between airline management and Southwest Airlines Pilots Association (SWAPA).

NEUTRAL

Major U. S. Southwest Airlines, the airline, is going through a significant upheaval following its dismal first-quarter financial results this week.

Following the announcement on Thursday, April 25, that it had recorded a net loss of $231 million, or $0.39 loss per diluted share, in the first quarter of 2024 despite record first-quarter revenue of $6.3 billion, up 11% from the same period the previous year, the airline said on Thursday, April 25, that it would terminate operations at four airports and lay off 2,000 employees. Significant operational changes and a hiring freeze have resulted from ongoing financial difficulties at Boeing, the manufacturer of aircraft.

Although the company had some successes in the first quarter of the year, CEO Bob Jordan acknowledged that significant changes are needed for the business to get through this challenging time.

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Jordan said in a statement on Thursday, “While it is disappointing to incur a first quarter loss, we exited the quarter with healthy profits and margins in the month of March.”. “We have already acted quickly to address our financial underperformance and make adjustments for revised aircraft delivery expectations. Our focus is on managing the things that we can control.”. “.

The Boeing Problem.

Since a midair door blowout on an Alaska Airlines flight in early January brought attention to the company’s issues, Boeing has been primarily held responsible.

Following that, the manufacturer has come under intense scrutiny for the safety record of its 737 MAX 9 aircraft. This has resulted in a number of mandated groundings of MAX 9 aircraft by the federal government, a delay in the certification of two new models of the aircraft, and an audit by the Federal Aviation Administration (FAA) that discovered numerous problems with the plane’s production process. For an answer outside of regular business hours, Newsweek sent an email to Boeing.

Southwest has also been directly impacted by Boeing’s safety record. When a Boeing 737-800 operated by Southwest took off from Denver airport earlier this month, the engine cowling fell off. Newsweek was previously informed by an FAA spokesperson that during takeoff, the engine cowling of Flight 3695 “fell off and struck the wing flap.”.

In 2018, an engine on a non-MAX Boeing 737 that was flying from New York to Dallas failed in midair. Jennifer Riordan, one of the 149 passengers, died when the majority of the engine inlet and some of the cowling broke off, shattering a window.

Southwest, which operates the most 737s worldwide, anticipates growth to be impeded as a result of Boeing’s problems. The company had anticipated 46 new Boeing aircraft this year; now, only 20 are anticipated.

According to a Wall Street Journal report, Jordan told investors this week, “I won’t downplay the challenges from the Boeing issues—they’re a big deal.”.

Newsweek was informed by attorney Chad D. Cummings, a former American Airlines employee, that “every aircraft brought to market has had its own share of teething issues, and the Max and 777X are no different.”. To be clear, the number of successful and uneventful flights since the first Max flight in 2016 does not imply that Max is intrinsically unsafe. It is not hard to imagine Boeing will keep putting in the effort behind the scenes to fix these problems and win back the public’s confidence.

“It is clear that there are detrimental synergies affecting multiple product lines, and Boeing’s problems are not specific to any one of them. ****.

Cummings clarified that if Boeing’s issues are not resolved, they may extend to other airlines and impact other aircraft manufacturers as well.

He declared, “The capacity cuts announced by Southwest will continue to be replicated at other carriers, even those that are not Boeing customers, unless and until that course correction can take place.”.

“This is because customers of Boeing are going to Airbus—the only other player in town—to make up for Boeing’s tardiness in delivering aircraft, which is increasing Airbus’ already sizable order backlog. “.

A Boeing representative declined to comment when Newsweek asked about it, pointing instead to chief financial officer Brian West’s remarks from the Bank of America Industrials Conference on March 20, which do not specifically address Southwest’s most recent announcement.

The most crucial thing we do is communicate with our customers, he said, even though we put them in a difficult situation. “They have also expressed support for all of our efforts to improve industry safety and quality. We communicate openly and frequently with Southwest, so they are aware of our current situation and the advancements we’ve made. However, we also have to be cognizant of their needs as they plan their flights and accommodate their passengers. “.

Adjustments to Operations.

Southwest announced on Thursday that it would terminate all services at Bellingham International Airport, Cozumel International Airport, George Bush Intercontinental Airport in Houston, and Syracuse Hancock International Airport as part of its cost-cutting measures. Additionally, Chicago O’Hare International Airport and Hartsfield-Jackson Atlanta International Airport will both experience capacity reductions.

The last time Southwest ceased operations at an airport was when it closed Newark Liberty International Airport in New Jersey in 2019.

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A portion of the service interruptions occur at airports that Southwest has only lately started to service. As of August of this year, Southwest will no longer be operating flights from Bellingham and Syracuse, where it has been operating since November 2021.

Along with that, the airline revealed that it is reevaluating its unusual for major airlines one-class, open-seating policy. Jordan stated in a CNBC interview that the airline is “looking into new initiatives, things like the way we seat and board our aircraft,” most likely referring to extra paid-for perks, in an effort to strengthen its financial position.

Changes in Employment.

In a statement released on Thursday, the company confirmed that it expects to “end 2024 with approximately 2,000 fewer employees as compared with the end of 2023” and stated that it was “implementing cost control initiatives, including limiting hiring and offering voluntary time off programs.”. “.”.

Newsweek was informed by a Southwest representative that the company is “not laying off or furloughing employees” and that the employee reduction is being accomplished through “attrition and other voluntary programs.”. “.

Tens of thousands of employees at Southwest have recently received pay raises. Just this past week, the airline’s flight attendants cast ballots in support of a pay increase of 22% right away and 3% annually until May 2028.

After nearly three years of negotiations between airline management and the Southwest Airlines Pilots Association (SWAPA), Southwest agreed to an immediate 29 percent salary increase with its 11,000 pilots earlier this year.

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