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Sunday, September 25, 2022

To deal with Omicron and staffing issues, Southwest is cutting schedules and increasing pay

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The Omicron form of COVID-19, as well as staffing challenges, are causing problems for Southwest Airlines (LUV).

The low-cost carrier from the United States said that it will no longer earn a profit in the first quarter and that it will reduce its schedule for the first half of 2022.

Omicron has reduced demand for air travel around the world, while many airlines believe this is merely a transitory effect.

A combination of harsh weather and a surge of Omicron-related disease among personnel has slammed North American airlines particularly hard, resulting in thousands of flight cancellations.

Southwest Airlines (LUV) announced on January 27, 2022 that it had canceled over 5,600 flights in January, the majority of which are due to staffing issues.

During a fourth-quarter earnings call, incoming CEO Bob Jordan told analysts and the public that the carrier had about 5,000 employees test positive for COVID-19 in the first three weeks of 2022.

As a response, Southwest is taking steps to improve wages and remove flights from its schedule, as well as hiring 8,000 people this year, according to Jordan, who will take over as CEO on February 1, 2022.

“We’re also raising our starting wage rates to be competitive in the market and due to the impacts from Omicron and the variant and recent staffing challenges.

We’re also reducing our capacity plans for the first half of 2022 to offer more buffer for the operation.”

From March through May, the carrier will reduce its schedule, resulting in a 4% reduction in capacity in 2022 compared to 2019.

It had previously predicted that capacity in 2022 will be around the same as in 2019.

Southwest has also increased employee incentive programs in order to increase manpower.

“We need pilots, we need flight attendants, we need ramp staffing, and you need the appropriate amount of buffer in all of those areas until we sort of see our way past COVID and understand what more normalized staffing, more normalized behaviors, more normalized sick leave looks like,” current chief executive Gary Kelly said.

The airline stated that business travel demand did not rebound as rapidly as expected at the start of 2022, owing to Omicron once again.

Taking everything into account, Southwest does not anticipate to earn a profit in the first quarter of 2022, but expects to make a profit in the following three quarters.

“With COVID-19 cases trending downward, the worst appears to be behind us, and we are optimistic about current bookings and revenue trends for March 2022,” Jordan commented.

Revenues plummeted 12% in the fourth quarter compared to the same period last year, including a $75 million blow from flight cancellations. It did, however, make a $68 million profit.

 

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