Southwest Airlines recorded a net $159 million loss in the first quarter (Q1 2023), despite setting a record for the early year period with $5.7bn in reported revenue.
The loss equated to 27 cents per share, while the reported revenue amounted to a 21.6% year-on-year increase.
"The company's first quarter 2023 revenue performance was strong," according to the Southwest results statement, with "the negative revenue impact primarily isolated to January and February".
The carrier had liquidity of $12.7bn at the end of the period, an amount it pointed out as "well in excess of debt outstanding", which stood at $8bn at the end of March, a month which if measured by itself would have shown Southwest to have returned to profit and to have taken in revenue comparable to the pre-pandemic period.
The Q1 loss was expected, according to Bob Jordan, the carrier's president and chief executive. "The majority of this impact was driven by a negative revenue impact of approximately $325 million, as a result of cancellations of holiday return travel and a deceleration in bookings for January and February 2023 travel," Jordan said.
The carrier pointed out that after "operational disruptions" during Q4 2022,when it had to cancel almost 17,000 flights, it handled the impact of "nine named storms" during Q1 2023.
The airline reported Q1 fuel costs of $3.19 per gallon, which it put "near the high end" of its previous guidance range. First quarter 2023 operating expenses of $6bn were an increased 23.6%, or 17.3% minus fuel.
While the carrier expects to increase capacity by at least 11% in Q3 2023, it said that because of "delivery delays" at Boeing, it would again cut its planned planned 2023 aircraft deliveries to 70 from 90, which would mean "an approximate one-point decrease in year-over-year planned 2023 capacity" but would nonetheless leave the carrier with a fleet of over 800 aircraft.
By then, the airline expects to be back to pre-pandemic flying, an outcome which, coupled with "current revenue trends" and "market wage rate accruals for all open labour contracts", would mean "solid profits and year-over-year growth in both margins and return on invested capital for full year 2023".
"While we are mindful of the uncertain economic environment, demand for domestic air travel remains strong," the carrier said.
Capital spending for the year is expected to be around $3.5bn, based on "approximately 70-80 aircraft deliveries", according to the carrier which estimated "approximately $1.2bn" in non-aircraft capital expenditure for 2023.
The carrier said it expects to return to profit in Q2 2022, but warned in its guidance for the second three-month period of the year that it foresaw a "headwind of approximately four and a half points, year-over-year", which is to be "driven by approximately $300 million of additional breakage revenue in second quarter 2022, a higher-than-normal amount related to flight credits issued during the pandemic that were set to expire unused".