World News

Southwest Airlines sees first-quarter revenue hit on coronavirus fears

WASHINGTON (Reuters) – Southwest Airlines Co <LUV.N> said on Thursday it expected a hit of up to $300 million to its first-quarter operating revenue from the new coronavirus outbreak, prompting it to cut its quarterly revenue outlook.

Shares of the company fell 3%, while with those of bigger rivals fell more. American Airlines Group Inc <AAL.O> fell more than 11%, United Airlines Holdings Inc <UAL.O> was down 10% and Delta Air <DAL.N> fell 7%.

Southwest said it has seen a significant rise in ticket cancellations and decline in traffic because of the outbreak, which has killed over 3,000 people and caused airlines across the world to cut flights and implement cost controls.

Southwest chief executive Gary Kelly said at an industry conference in Washington the company had not decided whether to cut its schedule but said that reducing prices would not address consumer fear.

“We could discount prices tomorrow and it wouldn’t do any good,” Kelly said.

Kelly told CNBC-TV that the decline in air travel demand felt more driven by fear, similar to the aftermath of the Sept. 11, 2001 hijacked plane attacks.

“9/11 wasn’t an economically driven issue for travel, it was more fear quite frankly and I think that’s what’s manifested this time,” Kelly said. “I think there’s elements of both but it has a 9/11-type feel. Hopefully, we’ll get this behind us quickly.”

United Airlines on Wednesday suspended its full-year forecast and said it would cut 20% of international flights and 10% of U.S. flights in April as it launched a hiring freeze, voluntary unpaid leaves and delayed salary increases for executives.

JetBlue Airways Corp <JBLU.O> said on Wednesday it was cutting capacity by 5% and shares were down 10% on Thursday.

Concerns over the still largely unknown impact of the virus led top executives from Southwest, United Airlines, American Airlines and JetBlue to meet with U.S. President Donald Trump on Wednesday.

Trump said the executives did not ask for any financial assistance.

Southwest said it now expects first-quarter total revenue per available seat mile – a closely followed measure of airline performance – to be down 2% to up 1%, compared with a 3.5% to 5.5% growth it forecast earlier.

It said it expected operating revenue to take a $200 million to $300 million hit. The company’s total operating revenue for the first quarter last year was $5.15 billion.

(This refile adds dropped word in headline)

(Reporting by David Shepardson in Washington, Uday Sampath in Bengaluru and Tracy Rucinski in Chicago; Editing by Shinjini Ganguli and Grant McCool)