South West Airlines
on Thursday tightened its revenue forecast for the third quarter as demand for leisure travel remained strong but business revenue languished well below 2019 levels.
However, there are signs that business travel could pick up, with Southwest (ticker: LUV) noting a significant improvement in the first weeks of September.
(DAL) signaled a similar emerging trend on Wednesday.
Southwest now expects third-quarter operating revenue to be 9% to 11% higher than the same period in 2019, up from a previous forecast of 8% to 12% higher.
“The company experienced strong travel demand for the Labor Day holiday and continues to experience strong revenue trends in the third quarter of 2022,” the airline said in a filing Thursday.
Leisure revenue trends remain above 2019 levels and beat business expectations, but the same is not true for business travel, at least during the summer.
Business travel revenue trends were weaker than expected from late July through August, Southwest said, down about 26% to 32% from 2019 levels, before improving until present in September. The company now estimates third-quarter business revenue to be between 26% and 28% down from 2019 levels, worse than the 17% to 21% drop in a previous estimate.
The improvement in the first weeks of September – estimated at 8 to 10 percentage points from August – could prove significant, particularly if this continues in the coming months as more people return to the office.
“Although early in the booking curve, the company continues to experience strong revenue trends in the fourth quarter of 2022,” he added.
An increase in business travel has also been felt by Delta, airline president Glen William Hauenstein told
Laguna Conference Wednesday. He said a “post-Labor Day business surge” has materialized. “It looks to us now that business is going to take a very big drop, which is always great for October.”
United Airlines (UAL) raised its revenue outlook for the third quarter last week, citing continued strong demand after a “robust summer”. United now expects total operating revenue in the quarter to be up about 12% from 2019 levels, up from a previous forecast of 11%.
Southwest shares fell 1% in premarket trading and are down 11% so far this year as of Wednesday’s close.
Write to Callum Keown at [email protected]