Both the Texas-based carriers posted a smaller-than-expected loss in the third quarter, but said rising fuel prices as well as higher labor costs are hurting earnings in the quarter through December.
Oil prices have surged to multi-year highs this year, threatening a fragile recovery in the airline industry. American, for example, spent nearly 70% more on jet fuel in the latest quarter than a year ago. Southwest’s fuel costs surged by 154% from a year ago.
Higher fuel costs tend to lead to result in less flown capacity and higher fares. Rival Delta Air Lines Inc, which expects fuel prices to result in a pre-tax loss in the current quarter, has suggested that it might pass along the increased costs to consumers.
Carriers are also trying to hire workers amid a pick-up in travel demand.
Southwest said it was aggressively hiring, with the aim of having about 5,000 new employees by the end of this year.
The company has had to cancel flights en masse partly due to staff shortages, having earlier added more flights to its schedule to capitalize on a hoped-for recovery in air travel as pandemic restrictions eased.
Such cancellations earlier this month are expected to result in a $75-million hit to the carrier’s October revenue.
“Third quarter 2021 was a challenge for us, operationally,” Chief Executive Gary Kelly said in a statement.
“We have reined in our capacity plans to adjust to the current staffing environment.”
Southwest expects its capacity in the December quarter to remain below the corresponding period in 2019. In the first quarter of 2022, its capacity is estimated to be about 6% lower than the pre-pandemic levels.
American said its capacity in the current quarter is expected to be down about 11% to 13% versus the fourth quarter of 2019. While revenue in the fourth quarter is estimated to recover to 80% of the 2019…