Bookings strong even as 737 MAX remains grounded

NEW YORK (Reuters): Southwest Airlines Co forecast better-than-expected second-quarter revenue growth on Thursday, citing demand from leisure and business customers, even as the low-cost carrier is forced to ground its 34 Boeing 737 MAX jets.

Dallas-based Southwest, the world’s largest MAX operator, said it expected closely watched unit revenue to grow by 5.5 percent to 5.7 percent year-on-year in the second quarter. It reported only 2.7 percent growth in the first-quarter, when it had to cancel more than 10,000 flights.

Its shares rose 1.8 percent in pre-market trading.

The No. 4 US airline said it lost more than $200 million in revenue during the first quarter due to thousands of cancellations caused by the partial US government shutdown, winter storms, maintenance disruptions and the worldwide grounding of Boeing Co 737 MAX jets.

Southwest reported first-quarter net profit of $387 million, or 70 cents per share, compared with $463 million, or 79 cents per share, in the year-ago quarter.

That beat Wall Street’s average estimate of 61 cents per share, according to IBES data from Refinitiv. Analysts cut their estimates sharply in late March after regulators around the world grounded Boeing’s 737 MAX jets following two fatal crashes.

Southwest has said its 34 737 MAX aircraft represent less than 5 percent of daily flights on its fleet of 753 aircraft.

Total operating revenue at the airline, which launched a service to Hawaii from California last month, rose 4 percent to $5.15 billion.

The low-cost carrier has removed the fuel-efficient, longer-range MAX from its flying schedule through Aug. 5 as it waits for Boeing to submit a software fix and new training guidelines to global regulators for review.

“Flight cancellations are expected to drive unit cost pressure for the duration of the MAX groundings,” Southwest Chief Executive Officer Gary Kelly said.

Unit costs, or total operating expenses per available seat mile, rose 5.9 percent in the first quarter. Cowen analyst Helane Becker said the number was better than expected as the carrier appeared to shift some expenses to future quarters.