Airlines are under pressure after weak second quarter earnings disappointed investors. Boyd Group International President Mike Boyd and Bloomberg Intelligence senior aerospace, defense, and airlines industry analyst George Ferguson join Morning Brief to discuss the outlook for Southwest Airlines (LUV) and Delta Air Lines (DAL) as they navigate recent headwinds and challenges.
Southwest announced it will be phasing out its open seating policy and replacing it with assigned and premium seating instead. Ferguson believes that the move caters to premium demand, explaining that it is a way to “pull in premium passengers, people willing to pay more for where they sit in the cabin or having a blocked middle seat.”
He adds that the decision shows that “Southwest is sort of making the evolution to one of those big three carriers that has more premium offerings by slicing and dicing the cabin, charging people more to sit together, to get preferential windows or aisle seats, and to have a premium product. And it’s their way to try to stem this revenue slide and look better than the ULCCs [ultra low-cost carriers].”
Meanwhile, Delta is still dealing with the fallout from the CrowdStrike (CRWD) outage that canceled and delayed thousands of flights worldwide last week. Some estimates show that the airline could take a profit hit of as much as $500 million, as it continues to cancel flights. Boyd calls the outage hitting Delta “a real surprise because they’re probably one of the most advanced out there in terms of tracking every single metric.” He adds that Delta Air Lines CEO Ed Bastian “isn’t going to let this happen again.”
The US Department of Transportation has since opened up an investigation into Delta’s delays in connection to the worldwide IT disruptions.
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This post was written by Melanie Riehl
