Southwest Says Bookings Have Slowed Following Fatal Accident

Apr 26, 2018

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Just more than one week after a Southwest Airlines engine exploded, resulting in the death of one passenger, the carrier says that its bookings have decreased.

In the company’s first quarter profit report released on Thursday, Southwest said that its Revenue per Available Seat Mile (RASM), a factor in pricing power, is expected to decrease 1%-3% in the second quarter. This, as compared to the second quarter RASM of 2017, which totaled 14.27 cents.

“Approximately one to two points of this estimated decrease is attributable to recent softness in bookings following the Flight 1380 incident,” the statement said.

This predicted decrease in RASM for Southwest is in contrast to positive outlooks from competing carriers, which are predicting an increase of pricing-power of as much as 5%.

Although Southwest is predicting its pricing power to decrease, it also announced that it’s going to exercise its options for an additional 40 Boeing 737 MAX 8 aircraft, adding 10 additional firm orders in each year between 2019 and 2022. Southwest was the North American launch customer of the 737 MAX in October 2017.

Other than the predicted decrease in RASM, Southwest’s first quarter total operating revenue increased 1.9% year-over-year, to a first quarter record $4.9 billion. Southwest attributes the profit to record passenger revenues of $4.6 billion.

The aftermath of Flight 1380, the first fatality on board a Southwest Airlines flight, is expected to loom over the carrier. Not only is it predicting its pricing-power gauge to drop next quarter, but the carrier was forced with complying with an FAA directive to inspect all CFM56-7B engines that have operated more than 30,000 total cycles to undergo inspection within the next 20 days. Southwest said on Wednesday that it had successfully completed engine inspections on all 256 engines in its fleet that fell under that FAA directive. It did not comment on any findings.

H/T: Bloomberg

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