Southwest Airlines brings back dividends for shareholders as travel rebounds – ET TravelWorld

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Southwest Airlines said recently that it is bringing back dividends for shareholders, which it suspended when the pandemic devastated the airline business in early 2020.Dallas-based Southwest said in a regulatory filing that it will pay a quarterly dividend of 18 cents per share on January 31. The move comes as air travel rebounds and US airlines return to profitability due to full planes and sharply higher fares than a year ago.

Southwest has posted the highest net income among US airlines in the first nine months of this year, reporting a USD 759 million profit in that span.

The airline said the decision to restore the dividend reflected a strong return in demand for travel and the company’s financial results since March. Executives said the trend of strong bookings is likely to spill into 2023 despite consumers facing high inflation and uncertainty about the economy.

“So far we are seeing no signs of a slowdown in travel demand,” Chief Financial Officer Tammy Romo said during a Southwest meeting with analysts in New York. Her comment echoed a similar remark this week by United Airlines CEO Scott Kirby.

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Southwest Airlines predicted that revenue from “managed” business travel in the quarter ending September 30 will be down 26 per cent to 28 per cent from 2019 levels. Earlier, the airline had predicted a 17 per cent to 21 per cent decline, which the airline attributed to “softer” last-minute business-travel bookings since late July.

US airlines were barred from paying dividends or buying back their own stock until October, as a condition of taking USD 54 billion in federal pandemic aid. None of the largest airlines have resumed share buybacks, which have drawn criticism from unions and congressional Democrats.“At some point it will be appropriate to talk about share repurchases, and that’s not today,” CEO Robert Jordan told analysts.

Southwest repeated its previous forecast that fourth-quarter revenue will rise by up to 17 per cent over the same period in 2019.

Jordan said last week that Southwest is unable to use 40 to 45 of its 700-plus airplanes because it doesn’t have enough pilots to fly them. The airline has been hiring, but is in the process of training more pilots. Southwest said in Wednesday’s filing that it expects to increase passenger-carrying capacity next year by up to 15 per cent.

Southwest – along with rivals Delta, American and United – is negotiating new contracts with many labor groups, most notably pilots, the highest-paid work group. A pilot shortage at smaller airlines is giving unions leverage to seek big raises. Last week Delta reached an “agreement in principle” to raise pilot pay by a cumulative 34 per cent over four years – a deal that could become the model for the other large airlines.

Southwest pilots picketed outside the investor event to call for higher pay. Their union said in a statement that the pilots were highlighting Southwest’s “deviation from its core values of taking care of its employees.”

Shares of Southwest Airlines Co fell 4 per cent in afternoon trading, and other US airlines also dropped.

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