Southwest Doubtful It Will Turn Third-Quarter Profit Without Federal Assistance

By Mary Ellen Cagnassola On 8/11/21 at 12:39 PM EDT

U.S. Southwest Airlines Travel Coronavirus Delta variant

The highly contagious Delta variant behind a global surge in COVID-19 infections has put Southwest Airlines in a financial bind, the company said Wednesday in an appeal for federal assistance.

The airline no longer expects to make a profit in the third quarter amid the poor outlook for travel. The revelation comes just a few weeks following Southwest CEO Gary Kelly's announcement that the company had reached a milestone in June by earning a profit excluding government pandemic relief.

Southwest said that although it was profitable again in July, the pandemic is a deterrent to travel that makes it unlikely that the airline will again profit in the third quarter without federal aid for payroll costs.

The prediction makes Southwest the second U.S. airline to temper expectations because of the Delta variant. Frontier Airlines, a smaller discount airline, said the virus has caused bookings to decline more than it usually does toward the end of the summer.

For more reporting from the Associated Press, see below.

Southwest Airlines says it now foresees operating revenue for the period coming in lower than previously expected due to COVID-19 cases. Above, people are seen wearing face masks while riding on a Southwest Airlines flight from Norfolk, Va., on November 23, 2020. Julio Cortez, File/AP Photo

Savanthi Syth, an airline analyst for Raymond James, predicted that other airlines will lower their revenue projections but probably not until early September.

In another sign of the impact that the surge in virus cases is having on travel, United Airlines announced last week that it will require workers to be vaccinated against COVID-19. Hawaiian Airlines followed with a similar announcement Monday, and Frontier will require workers who don't get vaccinated to undergo "regular" testing for the virus.

Southwest, however, has resisted making vaccinations mandatory. American Airlines and Delta Air Lines also have stuck to their current strategy of encouraging but not requiring workers to get the shots.

United CEO Scott Kirby was scheduled to take part in an online meeting Wednesday with President Joe Biden that is designed to persuade more companies to require vaccinations for their employees.

Southwest said Wednesday in a filing with the U.S. Securities and Exchange Commission that last-minute bookings have dropped while cancellations have increased in recent weeks, and it tied both trends to the rise in COVID-19 cases.

Southwest said last month that it hoped to be profitable in the third and fourth quarters even without federal pandemic aid, but it warned then that rising virus cases could alter those expectations. U.S. airlines have received $54 billion in federal pandemic relief since March 2020. The aid is scheduled to end Sept. 30 but has been extended twice before.

Despite rising infections, the U.S. continued to set new marks for air travel during the pandemic, with more than 2.2 million people going through airport checkpoints on Aug. 1, according to the Transportation Security Administration.

Since then, however, crowds have thinned slightly. The 7-day moving average of U.S. flyers dropped for a ninth straight day on Tuesday, when TSA screened slightly more than 1.7 million travelers, the lightest day since July 4 and a 25 percent decline from the comparable Tuesday in 2019.

Despite the warning from Southwest, shares of the Dallas-based carrier and other U.S. airlines rose slightly in morning trading.