Southwest Airlines earnings take hit from 737 Max groundings

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Southwest Airlines Boeing 737 MAX aircraft are parked on the tarmac after being grounded, at the Southern California Logistics Airport in Victorville, California on March 28, 2019.

Mark Ralston | AFP | Getty Images

Southwest Airlines Boeing 737 MAX aircraft are parked on the tarmac after being grounded, at the Southern California Logistics Airport in Victorville, California on March 28, 2019.

Southwest Airlines first-quarter earnings took a hit from the prolonged grounding of the Boeing 737 Max jets that forced it to cancel more than 10,000 flights during the quarter, as well as the U.S. government shutdown and maintenance issues, the company said Thursday.

The airline, which has 34 of the Max jets, said it lost more than $200 million in revenue during the quarter as a result. The shutdown and groundings also impacted the company’s revenue per available seat mile by 2 points.

The carrier said it’s extending Max cancellations through Aug. 5. Still, its earnings and revenue were better than expected and its shares rose 2.5% in premarket trading Thursday.

Here’s what the airline reported, versus average analysts estimates compiled by Refinitiv:

  • Adjusted earnings: 70 cents vs 61 cents per share forecast
  • Revenue: $5.15 billion vs $5.12 billion forecast

The 737 Max has been grounded since mid-March after the jet’s anti-stall software was implicated in two fatal crashes in Ethiopia and Indonesia.

“Flight cancellations are expected to drive unit cost pressure for the duration of the MAX groundings,” Southwest Chief Executive Officer Gary Kelly said in a statement. He described the results as “solid” despite several challenges throughout the quarter.

“I am especially proud of our nearly 60,000 Employees for the commendable job under operationally difficult circumstances.”

Raymond James downgraded Southwest stock and lowered its earnings projections in April, citing the Max groundings.

It’s unclear when the Max will return. Boeing, which expects a hit of more than $1 billion from the grounding, said it’s completed 96 flights totaling over 159 hours of air time with the new Max software fix.



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