Southwest Airlines reported "robust" corporate travel demand during the first quarter, despite headwinds: more than 10,000 flight cancellations related to the Boeing 737 Max 8 grounding, maintenance issues during a March spat with its mechanics' union and winter weather.
Passenger revenue grew 3.5 percent year over year during the quarter to $4.7 billion, and the average fare increased 3.6 percent to $151.60. Amid the cancellations, traffic rose 0.9 percent and capacity 1.4 percent, leading to a load factor decline of 0.5 percentage points to 81 percent.
Southwest's 34 Max aircraft, which account for just under 5 percent of the carrier's daily flights, remain off Southwest's flight schedule through Aug. 5. Executives said they are using that downtime for inspections and planned work on the aircraft in advance of their return to the fleet.
The government shutdown also hit leisure demand during the first quarter, though Southwest president Tom Nealon said that is now recovering and that "business travel demand remains strong."
CEO Gary Kelly said he was "very pleased" with Southwest's service to Hawaii, which began during the first quarter and will be the "key expansion focus" for Southwest through 2020. The carrier will begin interisland service in Hawaii this weekend, the first major competitor to Hawaiian Airlines on those routes.
Southwest reported a net income of $387 million for the quarter, down from $463 million in the first quarter of 2018. The cancellations and shutdown cost Southwest about $150 million in net income, Kelly said.
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