Southwest CEO cites ‘somber time’ after accident, warns of softer bookings
Southwest CEO Gary Kelly acknowledged Thursday that the accident that resulted in the death of a passenger still casts a cloud over the U.S. air carrier.
“It remains a somber time for the Southwest family following the Flight 1380 accident, and our thoughts and prayers continue to be with the Riordan family, and all of our customers on the flight,” Kelly said, adding that the company will continue to cooperate as the National Transportation Safety Board (NTSB) investigates.
Southwest shares were down on Thursday.
The accident occurred last week on a flight from New York to Dallas after an engine on the Boeing 737-700 exploded. The cabin lost pressure as debris broke a window, and a passenger, Jennifer Riordan, was partially sucked out of the aircraft. The plane made an emergency landing in Philadelphia, where Riordan died in a hospital. The NTSB said its preliminary investigation of the incident indicated signs of “metal fatigue.”
The engine on a Southwest Airlines plane is inspected as it sits on the runway at the Philadelphia International Airport after it made an emergency landing in Philadelphia, Tuesday, April 17, 2018. (Amanda Bourman via AP) (Amanda Bourman via AP)
As a result of the accident, Southwest expects softer bookings and a decline in revenue per available seat mile of 1% to 3% in the second quarter.
“Approximately one to two points of this estimated decrease is attributable to recent softness in bookings following the Flight 1380 accident,” the airline said.
Before Thursday’s opening bell, North America's largest low-cost carrier posted earnings per share of 75 cents, narrowly beating Wall Street’s estimate of 74 cents. Revenue of $4.9 billion for the quarter missed analysts’ predictions of $5.01 billion. It was still up 1.9% from a year earlier.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| LUV | SOUTHWEST AIRLINES CO. | 27.07 | -2.21 | -7.56% |
| AAL | AMERICAN AIRLINES GROUP INC. | 13.69 | -0.23 | -1.69% |
| UAL | UNITED AIRLINES HOLDINGS INC. | 52.47 | -0.20 | -0.39% |
| DAL | DELTA AIR LINES INC. | 48.30 | +0.36 | +0.75% |
| JBLU | JETBLUE AIRWAYS CORP. | 5.63 | -0.28 | -4.65% |
Southwest had already lowered its projected revenue per available seat mile last month in a regulatory filing, citing a “competitive fare environment” and lower-than expected travel demand.
There has been speculation that Berkshire Hathaway CEO Warren Buffet, the second- largest shareholder in Southwest, with an 8.1% stake in the company, might be interested in buying the entire airline.
The Oracle of Omaha said in Berkshire’s annual letter that with $116 billion in cash, the company is poised to make “one or more huge acquisitions.” Buffett also said in February that he wouldn’t rule out an airline deal.