Southwest Airlines Forecast Q3 Leisure Travel Revenue Above Expectations

Southwest Airlines reported Thursday that leisure travel revenue for the current quarter exceeded forecastshighlighting the continued popularity of travel despite high inflation.

After the labor holiday weekend, leisure travel normally declines, but the airline claimed it still sees “strong revenue trends” in the third quarter.

Investors have been paying close attention to airline commentary on demand due to concerns that household budgets may suffer from high inflation.

However, the country airlines claim that thus far they have not taken any significant hits.

“Although early in the booking curve, the company continues to experience strong revenue trends in fourth quarter 2022,” Southwest said while restating its forecast for full-year profits.

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The company reduced its operating revenue growth forecast for the quarter ending September to 9% to 11% compared to the same quarter in 2019, from 8% to 12% previously.

Leisure revenue trends continue to outpace 2019 levels and exceed the company’s forecasts. Unfortunately, the same cannot be said for business travel, at least not during the summer.

Southwest reported that business travel revenue performance fell short of forecasts from late July through August, falling 26% to 32% below 2019 levels before rebounding in September.

The company now expects third-quarter revenue to be between 26% and 28% below 2019 levels, compared with an earlier estimate of 17% to 21%.

The improvement in the first weeks of September is estimated to be 8 to 10 percentage points higher than in August when it could be significant, especially if it continues in the coming months as more people return to work.