In a move reflective of the evolving landscape of the aviation industry, Southwest Airlines announced on Thursday its decision to scale back its capacity growth for the upcoming year. The airline cited a moderation in travel demand and a return to pre-pandemic booking patterns as the primary reasons behind this strategic adjustment.
Southwest’s new plan includes expanding its flying capacity by 10% to 12% in the first quarter of 2024, a notable decrease from its previously projected growth of up to 16%. For the full year of 2024, the airline anticipates a growth of 6% to 8%. This decision comes after a year of expanded flying by airlines and a return of travellers to more traditional booking habits, where peak vacation periods and holidays are preferred. The increase in capacity had led to a drop in airfare prices.
CEO Bob Jordan explained the rationale behind the company’s decision, stating, “As we move into 2024, we are slowing our [available seat mile growth] rate to absorb current capacity, mature development markets, and optimize schedules to current travel patterns.” In the third quarter, Southwest reported a 30% drop in net income from the previous year, amounting to $193 million or 31 cents per share, while its revenue saw a 4.9% increase, reaching $6.53 billion.
Southwest was one of many airlines adjusting its growth plans. Spirit Airlines also reviewed its growth strategies after reporting a third-quarter loss of $157.6 million, a stark contrast to its $36.4 million loss in the previous year. Spirit’s CEO Ted Christie commented on the situation, saying, “Softer demand for our product and discounted fares in our markets led to a disappointing outcome for the third quarter of 2023.”
In contrast, Frontier Airlines experienced a swing from a $31 million profit in the previous year’s third quarter to a $32 million loss in the same period this year. Like its counterparts, Frontier forecasted negative margins for the fourth quarter.
The airline industry continues to grapple with the aftereffects of the pandemic, adjusting to shifts in travel demand and booking patterns. With its decision to slow down capacity growth in 2024, Southwest Airlines reflects a strategic approach to navigate these turbulent times and adapt to the new normal.
