By Rajesh Kumar Singh and Shivansh Tiwary
(Reuters) -Southwest Airlines on Thursday warned of higher costs and slower revenue growth this year after slashing its estimates for new aircraft deliveries from Boeing (NYSE:) by more than half, sending its shares lower.
The Dallas-based airline said it will end operations at some airports, limit hiring and offer voluntary time off programs as it now expects to receive just 20 aircraft this year – down from 46 estimated in March.
Reuters had exclusively reported the delivery cuts earlier this month.
Southwest warned there was no assurance that Boeing would meet this most recent delivery schedule. CEO Bob Jordan said the delivery delays would pose “significant challenges” for the carrier this year and next.
This is the third time Southwest has cut its aircraft delivery estimates. It originally planned on receiving 85 Boeing jets this year.
Southwest’s shares were down about 9% at $26.75 in morning trade.
Boeing is reeling from a safety crisis sparked by a January mid-air cabin panel blowout on an Alaska Air (NYSE:) flight. Regulators have put a cap on production of the 737 MAX, but the company is not hitting even that level, Reuters reported this month.
The jetmaker’s woes are rippling through the industry as a shortage of planes is making it harder for airlines to keep up with travel demand that is set to hit record levels this year.
But Southwest, which operates an all-Boeing fleet, is one of the hardest-hit. It now expects its total seat capacity to rise 4% year-on-year in 2024, compared with 6% growth estimated earlier.
The company said reductions in schedules will not only result in a slower-than-expected growth in revenue this year from a year ago, but also translate into higher-than-expected operating costs.
To mitigate the impact, Southwest said it is trying to enhance productivity and control discretionary spending.
“We are focused on controlling what we can control and have already taken swift action to address our financial underperformance and adjust for revised aircraft delivery expectations,” Jordan said.
It has already stopped hiring pilots and flight attendants and now expects to end the year with about 2,000 fewer employees than in 2023.
Southwest said it will end its services at Bellingham International Airport in Washington, Cozumel International Airport in Mexico, Houston’s George Bush Intercontinental Airport, and New York’s Syracuse Hancock International Airport in August.
It will also cut capacity in markets like Chicago and Atlanta.
Southwest reported an adjusted loss of 36 cents a share in the first quarter. Analysts on average were expecting a loss of 34 cents, according to LSEG data.
