Southwest Airlines today reported a net loss of $20 million for the first three months of the year, representing its first first-quarter loss since 1991.
Echoing sentiments expressed in American Airlines' earnings call yesterday
(BTNonline, April 15), Southwest CEO Gary Kelly said business and corporate traffic had taken a particularly hard hit, noting that full fares booked closer to the date of departure—fares typically preferred by business customers—softened significantly in recent months. However, Kelly noted, "That seems to have bottomed out in March," though it's too soon to suggest stabilization in business demand declines.
Southwest CFO Laura Wright said the carrier during the first quarter increased the number of fare sales, which helped steer load factors toward a first-quarter record, but damaged the carrier's yields. Wright today during the carrier's earnings call said, "Business travel slowed considerably, which drove a 2.8 percent decline in our yields. Our full fare mix for the quarter was 20 percent, which was down 4 points form the fourth quarter and down almost 6 points from the first quarter in 2008."
The carrier today said it is stepping up efforts to cut capacity this year, which is spurring it to implement voluntary employee furloughs. Southwest in January targeted a full-year decline in available seat miles of 4 percent, representing the first annual capacity reduction in its history, and today said the reduction would be closer to 5 percent.
Meanwhile, despite being pressed by analysts on the earnings call to justify Southwest's resistance to match baggage fees and other ancillary revenue charges, Southwest said it would continue to offer checked bags for free.