Southwest Airlines lowers outlook as delta variant hits bookings

After weeks of relief that saw the demand for air travel recover significantly, the delta variant of the Coronavirus is starting to threaten the airline industry again. On Wednesday, Southwest Airlines Co (NYSE: LUV) slashed its forecast for profit and revenue, citing weaker bookings due to the resurrecting pandemic risks.

The announcement comes only a week after Frontier Airlines warned that the delta variant was posing a serious threat to future performance.

August revenue to take an about 3% hit versus the previous guidance

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According to Southwest Airlines, its operating revenue in August will remain up to 20% down compared to 2019 equivalents (before the pandemic). In its previous guidance, it had anticipated a maximum of 17% decline only.

Shares of the world’s largest budget airline tanked 1% in premarket trading but recovered almost completely on market open. In its filing on Wednesday, Southwest said:

“Southwest has recently experienced a deceleration in close-in bookings and an increase in close-in trip cancellations in August 2021, which are believed to be driven by the recent rise in COVID-19 cases associated with the Delta variant.”

Southwest had turned a profit without federal help in June

As Americans continued to get vaccines and returned, at least for domestic travel, Southwest turned profitable without federal help in June for the first time in months. Considering the hit from the delta variant, however, the airline warned that it will again swing to a loss in the third quarter to September.

The air carrier expects revenue to remain up to 25% down in September versus the comparable period of 2019.

Reporting on the news, CNBC’s Phil LeBeau highlighted on “Squawk Box” that it was less than three weeks ago when CEO Gary Kelly had expressed confidence that the company hadn’t seen any impact from the delta variant so far. So, the American travellers, he added, had drastically changed their attitude towards travelling within a short period of about three weeks.