Southwest says deadly engine disaster is hurting business
Southwest Airlines on Thursday warned that fallout from a fatal midair explosion last week will weigh on second-quarter bookings, as investigators continued to probe the events that led to the first passenger death in the airline’s history.
Second-quarter unit revenue will drop by 1 percent to 3 percent, the carrier said in its quarterly earnings report, with 1 to 2 percentage points attributed to a decrease in bookings following the engine explosion.
Shares of the Dallas-based carrier fell 3.3 percent to $52.08, adding to the 19.6 percent year-to-date decline.
Southwest has been under intense scrutiny in the days since an engine on one of its Boeing 737 jets blew apart during a flight last Tuesday, killing one of 149 people aboard and raising concerns about the safety of similar engines.
“It remains a somber time for the Southwest Family following the Flight 1380 accident,” CEO Gary Kelly said in a statement. “We continue to cooperate with the National Transportation Safety Board’s thorough investigation to understand the cause of the accident.”
The incident marked the first fatality on a US commercial passenger airline since 2009 and the first such passenger death in Southwest’s 51-year history.
Over the next month it will begin inspecting other CFM56-7B engines, the one involved in last week’s accident, Southwest has said. The engine is manufactured by CFM International, a joint venture of General Electric and France’s Safran.
It was not immediately known how much Southwest will record in expenses related to the engine blowout over the next several months.
The carrier included a preliminary estimate in its second-quarter unit cost outlook of an increase of 1 percent to 2 percent, also including some pressure from employee wage and benefit increases.
Southwest has sent $5,000 checks to passengers of the April 17 flight and canceled dozens of other flights in an effort to voluntarily ramp up engine inspections.
As of Thursday, Kelly said in an interview with CNBC the airline had inspected about 80 percent of its fleet. Kelly said the airline plans to conclude inspections by the end of May.
The airline has declined to say how many CFM56-7B engines were inspected prior to the accident and if the engine that failed has been inspected.
A Southwest flight in August 2016 with the same type of CFM56-7B engine made an emergency landing in Pensacola, Florida, after a fan blade separated and debris ripped a hole above the left wing.
After the incident, European regulators gave airlines nine months to check the engines. US regulators were still considering what to do after proposing some checks.