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A Southwest Airlines jet sits at a gate at Orlando International Airport in Orlando, Fla., on Oct. 11, 2021. (Joe Skipper/Reuters) American Airlines and Southwest Airlines on Thursday warned mounting inflationary pressures could overshadow strong holiday demand and delay a complete return to profit.
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 percent more on jet fuel in the latest quarter than a year ago. Southwest’s fuel costs surged by 154 percent 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. However, a tight labor market is forcing the company to offer higher wages and better benefits to attract talent.
The airline 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.
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Such cancellations earlier this month are expected to result in a $75-million hit to Southwest’s October revenue.
“I would be the first to admit that things are messy,” Chief Executive Gary Kelly said on an earnings call. “We’ve gone from not enough to do to too much to do in a very short period of time.”The company is also worried that the White House’s vaccine mandate could worsen its staffing problem. Kelly said he is empathetic with those employees who don’t want to get vaccinated against COVID-19, assuring the company won’t fire any one for defying the mandate. An airlines worker […]
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