Southwest Airlines' Q4/Full-Year 2023 Financial Results

DALLAS — Southwest Airlines (WN) has released its financial results for the fourth quarter and full year of 2023. Additionally, the airline announced during its earnings call today that it would be reducing the number of Boeing 737 MAX aircraft deliveries it expects to receive.

In addition, the airline stated that it had decided to exclude the Boeing 737-7 variant of the MAX series from its fleet plans for 2024. This particular model has been facing certification delays, which has contributed to the airline's decision, an important one given that it is the type's largest customer.

Furthermore, the Dallas-based LLC does "not assume placing the MAX 7 in service this year" since it is subject to Boeing's production capability. This follows the U.S. Federal Aviation Administration's (FAA) prohibiting Boeing from increasing production of its MAX aircraft, one of the many consequences stemming from this month's events with the Boeing 737-9.

The world's second-largest low-cost carrier (LCC) by passengers carried now anticipates taking delivery of 79 MAX aircraft this year, down from its previous estimate of 85.

2023 Financial Results: Key Highlights

1. Fourth Quarter Net Loss: Southwest reported a net loss of $219 million, or $0.37 loss per diluted share, for the fourth quarter of 2023.
2. Fourth Quarter Net Income (excluding special items): The airline reported a net income of $233 million, or $0.37 per diluted share, for the fourth quarter of 2023, excluding special items.
3. Full Year Net Income: Southwest reported a net income of $498 million, or $0.81 per diluted share, for the full year of 2023.
4. Full Year Net Income (excluding special items): The airline reported a net income of $986 million, or $1.57 per diluted share, for the full year of 2023, excluding special items.
5. Record Operating Revenues: Southwest achieved record operating revenues of $6.8 billion for the fourth quarter of 2023 and $26.1 billion for the full year of 2023.
6. Liquidity: The airline reported liquidity of $12.5 billion, which is well over its outstanding debt of $8.0 billion.

Revenue Results

1. Fourth Quarter Operating Revenues: Southwest's operating revenues for the fourth quarter of 2023 were a record $6.8 billion, representing a 10.5 percent increase year-over-year.
2. Full-Year Operating Revenues: The airline achieved record operating revenues of $26.1 billion for the full year of 2023, which is a 9.6 percent increase year-over-year.
3. Fourth Quarter RASM: Southwest's revenue per available seat mile (RASM) decreased by 8.9 percent year-over-year for the fourth quarter of 2023, but it performed better than the company's previous guidance range due to higher-than-expected close-in bookings and continued yield strength.

Fuel Costs

1. Fourth Quarter Economic Fuel Costs: Southwest's economic fuel costs for the fourth quarter of 2023 were $3.00 per gallon, which is at the lower end of the company's previous expectations. This includes $0.05 per gallon in premium expenses and $0.12 per gallon in favorable cash settlements from fuel derivative contracts.
2. Full Year Economic Fuel Costs: The airline's economic fuel costs for the full year of 2023 were $2.89 per gallon, in line with previous guidance. This includes $0.06 per gallon in premium expenses and $0.12 per gallon in favorable cash settlements from fuel derivative contracts.
3. Fuel Efficiency: Southwest's fuel efficiency improved by 4.0 percent year-over-year for the fourth quarter of 2023, primarily due to the increased presence of its fuel-efficient Boeing 737-8 aircraft in its fleet.

Non-Fuel Costs

1. Fourth Quarter Operating Expenses: Southwest's operating expenses increased by 9.5 percent year-over-year to $7.2 billion for the fourth quarter of 2023.
2. Fourth Quarter CASM-X: The airline's cost per available seat mile, excluding fuel and oil expenses, special items, and profit-sharing, decreased by 18.1 percent year-over-year for the fourth quarter of 2023. The full-year 2023 CASM-X decreased by 1.2 percent year-over-year, both in line with previous expectations.
3. Profit-sharing Expense: Southwest accrued $118 million of profit-sharing expenses for 2023 for the benefit of its employees.

Capacity, Fleet, Capital Spending

1. Capacity Growth: Southwest's capacity increased by 21.4 percent for the fourth quarter of 2023 and 14.7 percent for the full year of 2023, both year-over-year. The airline expects its capacity to increase approximately 10 percent in the first quarter of 2024, 8 percent to 10 percent in the second quarter, 3 percent to 5 percent in the third quarter, and approximately 6 percent for the full year of 2024, all year-over-year.
2. Fleet: Southwest received 17 Boeing 737-8 aircraft during the fourth quarter of 2023, totaling 86 -8 aircraft deliveries in 2023. The airline ended 2023 with 817 aircraft in its fleet, including 39 -700 aircraft retirements.
3. Capital Spending: Southwest's full-year 2023 capital expenditures were $3.5 billion, and it estimates its 2024 capital spending to be in the range of $3.5 billion to $4.0 billion. The airline plans to spend approximately $1.7 billion in 2024 on technology investments, upgrades, and system maintenance. It also estimates an average annual capital expenditure of approximately $4 billion through 2027.

All figures are expressed in USD.

Featured image: N7204U, Southwest Airlines Boeing 737-7 MAX @KRNT. Photo: Michael Rodeback/Airways