Southwest (LUV) revenues rise despite $ 210 million hit from Boeing 737 Max ground support
Southwest Airlines Boeing 737 MAX aircraft parked on tarmac after being grounded at California California Logistics Airport in Victorville, California March 28, 2019.
Mark Ralston | AFP | Getty Images
Strong travel demand helped lift Southwest Airlines revenue and profits in the third quarter, but the low-cost carrier warned the economic hit from the Boeing 737 Max ground support would "grow" by 2020.
The airline is the largest operator of 737 Max, and it had 34 of them in its fleet because of the worldwide ground support in mid-March, in the wake of two fatal crashes.
Southwest said the ban, the largest ever, cost $ 21[ads1]0 million in sales in the quarter, but sales continued to rise just over 1% to $ 5.64 billion, in line with analysts' estimates. Net income rose 7% to $ 659 million, a record for the third quarter. On an adjusted basis per share, earnings in the third quarter came in at $ 1.23, above analysts' expectations of $ 1.08 per share.
The airline's shares were close to 2% in premarket trading.
Southwest said the base increase cost it sales of $ 435 million in the first nine months of the year. The airline added that it expects "the damage will grow into 2020."
The airline removed its aircraft from its routes through February 8, later than any American airline.
The foundation has forced airlines, like Southwest, to curb their growth plans, but limited capacity has helped raise prices.
On Wednesday, Boeing repeated its forecast for regulators to lift the ban on aircraft by the end of the year. The manufacturer has developed software changes for the aircraft after an air traffic control system became involved in the two crashes, but regulators have not yet logged off on fixes.
Southwest chief executive Gary Kelly warned that even if the FAA lifted the ban before the fourth quarter, the carrier would need one to two months to complete pilot training and other steps to get aircraft ready for passengers.
"The FAA will determine the timing of the MAX return to service, and we do not offer any assurances that estimates and timelines are correct," Kelly said in a release.
Boeing in the second quarter took a $ 4.9 billion after-tax fee to compensate airlines, but final amounts are unknown because regulators have not yet lifted the ground support.
"We have not reached a settlement with Boeing, and no estimated settlement amounts are included in Q3 2019 results," Kelly said.
