Southwest Airlines has seen a decline in reservations
following its fatal accident this month, but the carrier has a rosy revenue
outlook later this year.
After engine failure forced
an emergency landing of Southwest Flight 1380 on April 17—resulting in the
death of a passenger who was sitting by a window damaged by shrapnel—close-in
bookings decreased, causing unit revenue to decline between 0.5 percentage
points and 1 percentage point, Southwest president Tom Nealon said during the
carrier's earnings call.
Southwest had paused marketing following the accident, but
the impact is stretching beyond short-term bookings. "We're also seeing an
impact on travel for May and beyond, so the full revenue impact isn't totally
clear," he said. "We do expect there will be a continued impact for
some time."
Southwest also has had to cancel some flights as it
investigates the accident. COO Mike Van de Ven said a fan blade was missing,
apparently broken off during the flight due to a fatigue fracture. At the time
of the accident, the carrier had inspected about half the fan blades in its
fleet, and it has accelerated inspections so all will be evaluated within a
month. No further cracks have been found. "It's an all-hands-on-deck
activity to work through the inspections and to understand what happened and
why," Van de Ven said. "We're going to do everything we can to ensure
it doesn't happen again."
The accident was Southwest's first passenger fatality.
Earnings
Southwest's total operating revenue rose 1.9 percent year
over year during the first quarter to $4.94 billion. Passenger revenue
increased 0.9 percent, but other revenue rose 19 percent, boosted by strong
growth in EarlyBird check-in and Upgraded Boarding products, Nealon said.
Traffic rose 3.7 percent and capacity increased 1.8 percent, pushing load
factor up 1.6 percentage points to 81.5 percent.
Southwest's average fare declined 4.9 percent year over year
to $146.33. Nealon noted a competitive fare environment, particularly in
California, where Southwest has added capacity and is working to win new
customers. The carrier, however, has "major enhancements to revenue
management" related to its
new reservations system coming online this year. That should provide
pricing power, chairman and CEO Gary Kelly said.
Southwest also announced details on its Hawaii
service. This year, it plans to begin selling tickets for flights to
Honolulu, Lihue, Kona and Kahului airports.
The carrier reported a net income of $463 million for the
first quarter, up from $339 million in the first quarter of 2017.
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