Delta spreads, Southwest no longer sees profit for quarter

The highly contagious delta variant has darkened the outlook for Southwest Airlines, one of the largest carriers in the U.S., which said that it no longer expects to turn a profit in the third quarter as COVID-19 infections spread.

The revelation, contained in a Wednesday filing with the U.S. Securities and Exchange Commission, comes just three weeks after Southwest CEO Gary Kelly called the airline’s most recent quarter a “milestone” after turning a profit in June without government assistance.

The airline said Wednesday that it was again profitable in July, but believes the recent negative effects of the pandemic on August and September revenue will make profitability less likely in the third quarter if the benefits of temporary, tax-funded salaries and wages relief are excluded.

The problems are appearing in what are called close-in bookings and close-in trip cancellations, trips people scheduled several weeks out. The first is falling, the second rising in recent weeks, Southwest said, and it tied those trends to the rise in COVID-19 cases.

Southwest said last month that it hoped to be profitable in the third and fourth quarters even excluding federal pandemic aid, but the spreading delta had already clouded that outlook. It warned at the time that rising infection rates could change its expectations and that is what happened Wednesday.

Despite rising infections, the U.S. hast continued to set high marks for air travel, with more than 2.2 million people going through airport checkpoints on the first day of August, according to the Transportation Security Administration.

Shares dropped more than 2% before the opening bell and shares of all other major airlines fell as well.