Travelers check in at Southwest Airlines at Hartsfield-Jackson Atlanta International Airport on June 28, 2024 in Atlanta, Georgia. The Transportation Security Agency (TSA) is expecting to screen more than 3 million individuals today in what is expected to be a record setting July 4th holiday travel week. Kevin Dietsch/Getty Images
Southwest Airlines reported a major drop in profit, falling by 46% in the second quarter, despite achieving a record revenue of $7.35 billion.
At the same time, the Dallas-based airline's profit for the quarter was $367 million, or $0.58 cents per share, which was above analysts' expectations-reflecting the challenges the airline faces, including rising nonfuel costs and a potentially oversupplied U.S. market.
In response, CNBC reported that the company forecasted a possible 2% drop in unit revenue for the third quarter, coupled with a projected increase of up to 13% in nonfuel costs. This forecast puts Southwest into tough adjustment as it contends with higher expenses and a competitive market that has forced airlines to discount ticket prices during a typically profitable period.
To hopefully bounce back from this, Southwest is implementing several major changes.
The airline will eliminate its open seating policy and introduce seat assignments, as well as offer an extra-legroom product starting next year, to increase revenue and align more closely with its network carrier rivals.
Southwest also plans to add overnight flights to its schedule as part of this overhaul.
These changes are expected to return what the company had lost as it dealt with delays in aircraft deliveries from Boeing, its sole supplier, due to ongoing safety and manufacturing issues.
Meanwhile, pressure from activist investor Elliott Investment Management, which recently acquired a nearly $2 billion stake in the company, has intensified calls for revenue growth and potential leadership changes.
CEO Bob Jordan emphasized that Southwest is taking urgent steps to address immediate revenue challenges while pursuing long-term initiatives aimed at driving substantial growth.
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