Southwest Airlines said it plans to resume next month growth plans for service to Hawaii, which was delayed due to the lack of available aircraft as a result of the Federal Aviation Administration’s grounding of Boeing 737 Max planes.
Gary C. Kelly, Chairman of the Board and Chief Executive Officer, said the carrier, which began Hawaii service in March was “very pleased with the results from our initial waves of Hawaii service.”
“Demand for Southwest service to, from, and within Hawaii is robust,” Kelly said this afternoon during a conference call to discuss the company’s second-quarter earnings. “The load factors are significantly higher than what we are experiencing across the system. Keep in mind we just announced record load factors for the entire company and our Hawaii business is surpassing that.”
Southwest, which is based in Dallas, posted net income of $741 million, or $1.37 per diluted share as compared with $733 million, or $1.27 per diluted share during the second quarter of 2018.
The company also reported second-quarter 2019 total operating revenues increased 2.9%, year-over-year, to an all-time quarterly record $5.9 billion, despite the negative revenue impacts as a result of flight schedule adjustments due to the Max groundings.
“Our financial and operational performance was remarkably strong considering the impact of the grounding of the Boeing 737 Max 8 aircraft, which reduced operating income an estimated $175 million in second quarter alone,” Kelly said.
While Kelly acknowledged that the lack of available aircraft, due to the Max groundings, resulted in expansion delays to Hawaii, he said Southwest is “excited to resume growth plans next month with the first of several intended announcements.”
The carrier soon plans to begin offering service to the Hawaiian islands from both Sacramento and San Diego, as well as bring Southwest service to both Lihue, on Kauai, and Hilo on Hawaii island.
“All the things we said previously, we still mean. We just have a little more work to do still,” Kelly said. “We’re working on our schedules. We aren’t ready to announce it, but we can’t wait to begin those (Hawaii) flights as well.”
Kelly said the carrier would “provide details of the next phases of Hawaii flying in the coming weeks and months, as we put new flights out for sale,” he said.
Hawaii’s been hearing that for a while now. The previously announced routes were expected to appear on the schedule with a much shorter lag than its been since Southwest entered the Hawaii market March 17 with service between Honolulu and Oakland, Calif. It launched its initial interisland service April 28 with flights between Honolulu and Kahului.
Southwest already has 16 interisland flights or 1,800 daily interisland air seats. The carrier has added 2,100 daily trans-Pacific air seats through the 12 daily trans-Pacific flights that it offers to and from Hawaii.
More Hawaii service announcements have been expected for months, but FAA grounded 737 Max 8 and Max 9 aircraft March 13 following a deadly crash in Ethiopia and an earlier one in Indonesia in October. While Southwest doesn’t yet fly Max planes in Hawaii, the carrier has had to stretch its fleet of 737-800s to cover for the Max aircraft that it removed from its schedule now through Jan. 5.
During the second quarter, Southwest experienced about 20,000 flight cancellations, when the normal is more in the 3,000 range. The carrier pinned the bulk of these cancellations on the grounding of all 34 of its Max aircraft from the 753 aircraft in its fleet during the second quarter. The carrier also expects a portion of its scheduled 2019 Max aircraft deliveries to shift into 2020.
“Despite challenges caused by the Max groundings, our network is performing well, and our financial outlook for second half 2019 remains solid,” Kelly said. “Looking ahead, our long-term financial goals remain unchanged: maintain a strong balance sheet, investment-grade credit ratings, and ample liquidity; generate robust operating and free cash flows; grow earnings, margins, and capital returns; and maintain healthy shareholder returns.”