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Southwest expects lower costs in third quarter

Low-cost carrier Southwest Airlines expects its third-quarter financial and operational results to be within range of its previous guidance, with some metrics showing improvement.

Southwest has reduced its cost per available seat-mile (CASM) forecast by one percentage point, and now expects a 8-10% increase rather than one of 9-11%, it has disclosed in an SEC filing.

The carrier has adjusted the figure "primarily due to the shifting of maintenance and technology expenses from third quarter into fourth quarter 2019, and continued cost control", and notes that the "majority of year-over-year unit cost increase in third quarter 2019 is driven by lower third-quarter 2019 capacity as a result of the Max groundings".

Prior to the 13 March grounding of the Boeing 737 Max fleet, the airline had predicted that CASM would increase just 2%.

Annual fuel costs are projected to be in the range of $2.05-2.15 per gallon while fuel efficiency is set to fall 1-2% year-over-year, owing to the grounding of the more efficient 737 Max 8, the airline says.

Dallas-based Southwest is maintaining its prediction that operating revenue per available seat will increase 3-5% year-over-year. Capacity is to be cut 3% in the period, rather than 2-3%.

The airline adds that the 600 flights it cancelled as a result of Hurricane Dorian will have an "immaterial impact" on its results for the quarter.

Second-quarter operating revenue reached a quarterly record of $5.9 billion, while net income rose to $741 million.

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