Southwest Airlines Co. shares /zigman2/quotes/201071949/composite LUV -3.05% slid 2.2% in premarket trade Thursday, after the company beat profit estimates for the second quarter but missed its sales estimate. Southwest said it had net income of $741 million, or $1.37 a share, in the second quarter, up from $733 million, or $1.27 a share, in the year-earlier period. Revenue rose to $5.909 billion from $5.742 billion. The FactSet consensus was for EPS of $1.34 and revenue of $5.936 billion. "Our financial and operational performance was remarkably strong considering the impact of the grounding of the Boeing 737 MAX 8 aircraft (MAX), which reduced operating income an estimated $175 million in second quarter, alone," Chief Executive Gary Kelly said in a statement. The airline has had preliminary talks with Boeing on compensation for damages due to the groundings, but "We have not reached any conclusions regarding these matters, and no amounts from Boeing have been included in our second quarter results," he said. Southwest is assuming regulatory approval of MAX return to service in the fourth quarter and will extend flight schedule adjustments through January 5, 2020. The company said it expects 2019 average seat miles to fall by 1% to 2% from the year-earlier. "As such, we are taking necessary steps to mitigate damages and optimize our aircraft and resources," said Kelly. "We will cease operations at Newark Liberty International Airport and consolidate our New York City presence at New York LaGuardia Airport, effective November 3, 2019." The company is expecting third-quarter revenue per average seat mile to increase by 3% to 5%. Shares have gained 17.7% in 2019, while the S&P 500 /zigman2/quotes/210599714/realtime SPX -1.51% has gained 20.5%.
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Airline stocks dragged down as Boeing 737 Max groundings sully earnings reports