Southwest Airlines, already under pressure from hedge funds after disappointing earnings, said Wednesday that a key profit margin will be lower than expected due to changes in how consumers book travel.
The airline said it still expects second-quarter revenue to reach a record high.
But Southwest said revenue per seat mile flown, a closely watched measure of pricing power, would fall 4 percent to 4.5 percent from a year ago.
The company said in April that the decline would be between 1.5 percent and 3.5 percent.
The airline is grappling with rising labor costs and expects its cost per mile to rise 6.5 percent to 7.5 percent from last year.
The Dallas-based airline said its weakening revenue-per-mile outlook was primarily due to the difficulty of adapting pricing to “current booking patterns in this dynamic environment.”
Travel is booming.
Airlines are expecting record numbers of passengers this summer, but adding more flights and seats reduces their pricing power.
Southwest Airlines plans to increase flight frequency by 8 to 9 percent compared to the second quarter of last year.
rear Loss of $231 million Southwest Airlines said in the first quarter that it would end service at four airports this year and cut 2,000 jobs.
This month, hedge fund Elliott Investment Management bought a $1.9 billion stake in Southwest Airlines and called for the ouster of Chief Executive Officer Robert Jordan and former CEO and current Chairman Gary Kelly for failing to modernize the airline’s technology and strategy to keep up with changes in travel.
Jordan said he has no plans to resign. Plans to increase profits At an investor briefing in September.
Southwest Airlines shares were flat on Wednesday after falling 4% on Wednesday morning.
Stocks have fallen about 15% over the past year, while the S&P 500 has risen 28%.
