Southwest Airlines (LUV) is feeling the pain from the Omicron variant of COVID-19 and staffing issues. The US low-cost carrier said it will no longer make a profit in the first quarter and announced cuts to its schedule plan for the first half of 2022.
Omicron has hit demand for air travel across the world, although many airlines expect the effect to be only temporary. North American airlines have also been hit particularly hard by a combination of bad weather and a wave of Omicron-related sickness amongst staff, leading to thousands of flight cancellations.
Southwest Airlines (LUV) said on January 27, 2022, that it has cancelled more than 5,600 flights so far in January, attributing the majority to staffing challenges. Incoming chief executive Bob Jordan told analysts and media on a fourth-quarter results call that the carrier had around 5,000 staff test positive for COVID-19 in the first three weeks of 2022.
Southwest is taking action as a result, notably on pay and removing flights from its schedule, plus aiming to hire 8,000 people this year, explained Jordan, who takes over as CEO on February 1, 2022.
“We’re also raising our starting wage rates to be competitive in the market and due to the impacts from Omicron and the variant and recent staffing challenges. And we’re further moderating our first half 2022 capacity plans to provide additional buffer for the operation.”
The carrier is making cuts to its schedule from March to May, which means 2022 capacity is now expected to fall by 4% compared to 2019. It had previously expected 2022 capacity to be roughly the same as 2019 levels.
Southwest has also extended employee incentive schemes to boost staffing.
“We need pilots, we need flight attendants, we need ramp staffing, and you need the appropriate amount of buffer in all of those areas until we sort of see our way past COVID and understand what more normalized staffing, more normalized behaviors, more normalized sick leave looks like,” current chief executive Gary Kelly said.
The airline said business travel demand at the start of 2022 had failed to return as quickly as it was originally expecting, again due to Omicron.
Taking everything together, Southwest does not expect to make a profit in the first quarter of 2022, though expects a return to profits for the remaining three quarters of the year.
“With COVID-19 cases trending downward, the worst appears to be behind us, and we are optimistic about current bookings and revenue trends for March 2022,” Jordan commented.
Revenues fell 12% in the fourth quarter compared with 2019 levels, including a $75 million hit as a result of flight cancellations. However, it posted a net income of $68 million.