DALLAS – Dallas-based low-cost carrier Southwest Airlines (WN) reports that its bookings in March were strong, allowing revenue to go up 22% to US$5.7bn in the first quarter of 2023. However, the airline also recorded a loss of US$159m for the period.

The US carrier canceled more than 16,000 flights in the last few days of December due to staffing software not keeping up with scheduling changes during storms across the country. This resulted in a revenue loss of US$325m for the quarter. Compounded with the financial toll of last year's meltdown to more than US$1.1bn, the total loss is more than twice as much as the carrier's profit in 2022

In January, the company had cautioned that it would incur a loss for the quarter and reported a rise in customer cancellations earlier this year. Following the release of its Q1 results, WN's shares fell by over 3% during afternoon trading.

Southwest predicts that revenue per available seat mile will decrease by 8% to 11% in the second quarter while capacity will increase by 14%. The airline attributes this decline in sales outlook to approximately US$300m in "breakage revenue" due to a higher-than-normal amount of flight credits issued during the pandemic that was set to expire unused.

It also expects costs, excluding fuel, to increase by 5% to 8% in the second quarter, with wage accruals for labor contracts under negotiation, including for pilots and flight attendants.

CEO Statement

Bob Jordan, the CEO of Southwest, announced that "the company incurred a net loss in Q1 2023 due to the negative financial impact of approximately $380 million pre-tax, or US$294m after-tax, related to the operational disruption in December 2022."

"This was primarily due to a negative revenue impact of approximately $325 million, which resulted from cancellations of holiday return travel and a slowdown in bookings for January and February 2023 travel. Despite this, travel demand and revenue trends in March 2023 were strong, resulting in solid month profitability and record first-quarter revenues," added Jordan.

"Southwest's (WN) operational performance was also strong in Q1 2023, ranking number two in domestic on-time performance year-to-date through March 2023, despite navigating nine named storms. The company completed its reviews of the December 2022 operational disruption and publicly released the report summary and action plan. WN expects to complete the action plan by winter 2023 and continues to focus on running a safe, reliable, and efficient operation while delivering excellent customer service," said Jordan

Bob stated, "The airline also recently reached a tentative agreement with the Transport Workers Union Local 550, representing meteorologists. This brings the company to contract ratification or tentative agreement with six workgroups represented by collective bargaining agreements in the past six months."

The CEO commended the spirit of cooperation by both negotiating committees and mentioned that "the company is focused on negotiations for the remaining three open contracts."

Boeing Delivery Delays Hurt WN Results

Southwest (WN) and American (AA) Airlines' CEOs announced that the delay in aircraft deliveries from Boeing is impeding their growth strategies. Due to repeated delays from the manufacturer, WN has lowered its expected Boeing 737 Max plane deliveries from 90 to 70.

The airline's CEO mentioned that "the company is being cautious about its plans as it has to hit its capacity plan by one percentage point for 2023. Additionally, due to Boeing delays, WN will have to slow down its hiring plan of 7,000 people this year."

Boeing reported on Wednesday that it would increase the output of 737 MAX planes to 38 per month this year after delays caused by supply chain issues and labor shortages.

Feature Image: N8828L Southwest Airlines Boeing 737-8 KPAE. Photo: Brandon Siska/Airways

https://airwaysmag.com/jetblue-southwest-2022-q4-full-year-results