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Southwest Airlines first-quarter earnings take a hit from 737 Max groundings, government shutdown

KEY POINTS

  • The carrier has grappled with the prolonged Boeing 737 Max groundings since mid-March.
  • Southwest, which has 34 of the 737 Max jets, extended cancellations through Aug. 5.
  • The Max comprises less than 5% of its fleet.

WATCH NOWVIDEO06:14Southwest CEO Gary Kelly on Q1 earnings, Boeing 737 Max

Southwest Airlines first-quarter earnings took a hit from the prolonged grounding of the Boeing 737 Max jets that forced it to cancel more than 10,000 flights during the quarter. The U.S. government shutdown and maintenance issues also ate into the bottom line, the company said Thursday.

The airline, which has 34 of the Max jets, said it lost more than $200 million in revenue during the quarter as a result. The shutdown and groundings also impacted the company’s revenue per available seat mile by 2 points.

The carrier said it’s extending Max cancellations through Aug. 5. Still, its earnings and revenue were better than expected and its shares rose 2.5% in premarket trading Thursday.

Here’s what the airline reported, versus average analysts estimates compiled by Refinitiv:

  • Adjusted earnings: 70 cents vs 61 cents per share forecast
  • Revenue: $5.15 billion vs $5.12 billion forecast

The 737 Max has been grounded since mid-March after the jet’s anti-stall software was implicated in two fatal crashes in Ethiopia and Indonesia.

Southwest CEO Gary Kelly said the company was an “all-Boeing carrier” but it didn’t mean the airline would use the 737s in “perpetuity.”

“We’re not happy about this Max situation obviously, who is. Two tragic accidents,” he said on CNBC’s “Squawk on the Street. ” “Our negotiations and our relationship with Boeing is something I’ll take up with [the company] privately.”

At the same time, he said he’s happy with how Boeing is handling the crisis and thinks the carrier’s “great historic partnership” will continue in the future.

“When we launched Max airplane, we felt like it was the best single-aisle airplane in the world, and we still feel that way,” he said.

Raymond James downgraded Southwest stock and lowered its earnings projections in April, citing the Max groundings.

It’s unclear when the Max will return to the skies. Boeing, which expects a hit of more than $1 billion from the grounding, said it’s completed 96 flight stotaling over 159 hours of air time with the new Max software fix.

“Flight cancellations are expected to drive unit cost pressure for the duration of the MAX groundings,” Kelly said in a statement. He described the results as “solid” despite several challenges throughout the quarter.

“I am especially proud of our nearly 60,000 employees for the commendable job under operationally difficult circumstances,” he said.

Fuel costs are expected to rise next quarter with second-quarter fuel efficiency to be flat-to-down 1 percent, year-over-year after the removal of its Max jets, which use less fuel than other planes.

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United tops Wall Street estimates on first-quarter profit, misses on revenue

GP: San Antonio International Airport

A United Airlines Boeing 737 passenger jet takes off at San Antonio International Airport in Texas.Robert Alexander | Archive Photos | Getty Images

United Continental Holdings, the parent company of United Airlines, reported first-quarter earnings Tuesday that beat Wall Street profit expectations but fell shy of revenue estimates, as the airline grapples with the prolonged grounding of Boeing’s 737 Max jets.

Here’s what the company reported versus what analysts polled by Refinitiv expected:

  • Adjusted earnings per share: $1.15 versus 95 cents expected.
  • Revenue: $9.59 billion versus $9.61 billion.

The carrier, which has 14 of Boeing’s 737 Max jets in its fleet, has grounded the aircraft through early July as Boeing rushes to fix a software problem suspected in two recent fatal crashes.

United shares jumped 2.9% after the markets closed Tuesday.

United’s total revenue rose to $9.59 billion during the first quarter, up 6.2% from $9.03 billion during the same period in 2018, the company said in releasing its earnings report after the markets closed Tuesday.

On an unadjusted basis, the company’s profit more than doubled to $292 million, or $1.09 per share, from $145 million, or 51 cents per share, during the same quarter last year.

United’s revenue for each passenger it flies a mile, a key industry metric, rose 1.1% over the same period last year, falling short of 1.5% projected by analysts.

United reiterated its full-year earnings guidance of between $10 and $12 per share for 2019 and said it expects to earn between $11 and $13 a share, on an adjusted basis, in 2020.

Executives are holding a call with analysts at 10:30 a.m. ET on Wednesday.

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Just back from: Spain, Cambodia, Greece & Australia

Tiles at the Alhambra, Spain

Our travel-mad staff share their recent adventures from enjoying cookery classes in Queensland to exploring architectural beauties in Andalucía and sitting in the shadow of thousands of bats flying out to feast in Cambodia.

Getting a fine-art fix inAndalucía, Spain

Some visitors to North Africa who pick up a bug can shake it after a few days, but the one I’ve acquired is going to stay with me for life. I’ve been infected with something like tile-itus, and now I seem to only be able to plan holidays that involve scouting out those colourful, geometric patterns that adorn everything from mosques and madrassas (Islamic schools) to fountains and flats. These tiles, called zellige in Arabic, spread across the Muslim world, which for centuries included the Andalucía region of southern Spain.

Inside the Moorish palaces of Real Alcázar in Seville and the Alhambra in Granada, where room after room is covered top to toe in tiles and other Islamic adornments, I got a healthy dose of the colourful medicine I now require, and I instantly found bliss wandering in silence amongst those millions of tiny blocks. But now that I’m back, where do I get my next fix?

Lauren Keith, Destination Editor for the Middle East and North Africa. Follow her on Instagram @noplacelike_it.

An army of bats streaking across the sky in Cambodia

Braving the ‘cold’ to see bats in Cambodia

My family and I were in Cambodia this past Christmas. Even though we sweltered in the heat, the Cambodians we met were quick to tell us this was the coldest winter they’d experienced in recent memory. This was fully realised one evening in Battambang, as we sat just down the road from the Killing Caves of Phnom Sampeau. Having scrambled to the mouth of an unmarked cave we lay waiting for the nightly exodus: thousands of bats, awoken from slumber, streaking across the sky in search of their first meal of the day. We checked the time. Any moment now… As the sun started to go down, our guide said, ‘They feel lazy. Maybe it’s too cold tonight.’

When the first bat darted out into the sky, it was barely noticed. Then, all at once, a deluge of them flowed from the mouth of the cave, chirping in unison as if to sing, ‘It may be cold, but a bat’s gotta eat!’ We watched the show against a perfect pinky sunset for half an hour. I don’t think I’d ever seen anything so amazing and so unexpected.

Rucy Cui, Publicity Associate. Follow her tweets @rucycui.

Marvelling at the seemingly impossible in Meteora, Greece

With numerous rock pinnacles rising hundreds of metres from a forest of oak in central Greece, Meteora is one of the most peculiar landscapes I’ve ever seen. What’s even more impressive is how monks have been making their homes on top of these rock giants for centuries – first in natural caves and later in architecturally astounding monasteries. Once a place to be alone with God, these days it’s rarely a place for solitude.

A handful of the two million people who visit each year come in February, and most drive between the best-known monasteries. A more rewarding way to do it is on foot. So we set off from the village of Kalambaka with our guide Christos to hike to one of the less-accessible monasteries. It was an hour-long walk on an unbeaten path through the forest to Ypapanti Monastery. Built into a rock cavity, it’s difficult to spot from ground level, so we wound our way up to the hilltop opposite. From here, the impossibility of how these enormous rocks could be inhabited really struck us.

We walked on until we finally emerged at Varlaam, one of the biggest monasteries. Cloud had begun to form around the base of the rocks, and the meaning of the name Meteora (suspended in the air) became apparent. For a moment, I too felt suspended, in awe of the wonder of nature and resilience of humankind.

Hazel Lubbock, Digital Platform Editor. Follow her on Instagram @hazellubbock.

Cliff with his beautifully presented beetroot three ways

Conquering a cookery class in Noosa, Queensland

The latex gloves were an unusual, slightly off-putting start to the cookery class. ‘To stop your hands getting stained’ was the reason given after my partner in cooking crime and I were told we would be preparing beetroot three ways. Glamorous they might not have looked, but the gloves took one for the team as I followed the recipe and got messy trying to create something that could sit proudly alongside the dishes being prepared by the rest of the class. The chef at Wasabi in Noosa, Queensland, was admirably patient as I chopped, fried, pureed and carefully arranged a variety of different coloured and sized beetroot. ‘Add some saffron flowers,’ he suggested. I sprinkled some on obligingly, turning over the last page of the now red-stained recipe book to check we hadn’t missed anything. We hadn’t. ‘Yours definitely looks the best of the lot,’ the chef said. He might well have said the same to the other pairs as they finished their dishes, but, as I pulled off my latex gloves with a satisfying snap, I didn’t care. Beetroot three ways. Clean hands. Cookery class complete.

Clifton Wilkinson, Destination Editor for Great Britain, Ireland and Iceland. Follow his tweets @Cliff_Wilkinson.

Clifton traveled to Queensland with support from Tourism Events Queensland. Lonely Planet contributors do not accept freebies in exchange for positive coverage.

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Boeing CEO says it’s completed 96 test flights with 737 Max software fix

Boeing has completed 96 flights testing the performance of the 737 Max with updated software for the plane’s flight control system.

“Our team has made 96 flights totaling over 159 hours of air time with this updated software,” said Boeing CEO Dennis Muilenburg while speaking Thursday at the George W. Bush Presidential Center in Dallas, Texas. Muilenburg, who went on a 737 Max test flight last week, says the company is making progress developing a plan to fix the aircraft’s MCAS flight control software and improve pilot training, two problems that will need to be resolved before regulators certify the plane to fly again.

“We continue to demonstrate that we’ve identified and met all certification requirements,” he said.

Boeing will conduct additional test flights on 737 Max, says CEO

The test flights are one prong of a broad effort by Boeing to get the Max back in the air. The company is also updating airlines by bringing representatives into flight simulators and showing them how the modified flight control system will feel in the cockpit. Boeing says representatives from two-thirds of the 50 airlines that have the Max in their fleets have tested the new software in a simulator.

“We want everyone to be confident in it and the additional training and educational resources we’re developing and deploying,” Muilenberg said, adding that the last few weeks have been the most “heartwrenching” of his career.

The company will likely submit its plan to fix the Max, which has been grounded since mid-March, to the Federal Aviation Administration and other regulators within the next two weeks, according to people familiar with the matter. Getting those regulators to approve the plan will likely take several more weeks.

“I expect that the airplane is still several weeks away from getting the final seal of approval to be flown again, not so much that the software fix is a problem, but just from an optics standpoint,” said Jeff Guzzetti, former director of the FAA’s accident investigation civision. Guzzetti believes the FAA is stinging from criticism its relationship with Boeing was “too cozy” because the FAA designated Boeing engineers to self-certify parts of the 737 Max before the plane was given final approval in 2017.

Boeing has scrambled to restore faith in its 737 Max after the jet’s anti-stall software was implicated in two crashes in the last five months that killed 346 people and grounded the planes worldwide. The company said it will cut Max production by 20% as it works on a software fix to get the jets running again. They’ve been grounded since mid-March.

Investigators suspect that faulty data feeding into the aircraft’s MCAS flight system played a major role in the Indonesia and Ethiopia accidents. Investigators and lawmakers have scrutinized Boeing’s software system malfunction, from the original design to the training and safety certifications.

When designing the newest Max jets, Boeing allegedly increased the power of the automated system that pushes the plane nose down, making it hard for pilots to regain control of the doomed jets. Changes to the anti-stall system were not fully reviewed by the FAA.

Boeing said Tuesday that deliveries and new orders for all of its 737 jets fell in the first quarter, and earlier in the week, Wall Street analysts downgraded Boeing stock. The company’s shares have have fallen nearly 9 percent in the past month.