Southwest Airlines ended the third quarter of 2022 with $13.7 billion in cash and short-term investments and a fully available revolving credit line of $1.0 billion. The airline recorded a net income of $277 with operating revenue of $6.2, a steady 10.3% increase over Q3 of 2019, and liquidity of $14.7bn, well in excess of its debt outstanding of 8.7bn.
Bob Jordan, Chief Executive Officer, said: "We are pleased to report solid third quarter 2022 profits and record third quarter operating revenues. Following record summer leisure travel demand, revenue trends remained strong in September 2022, bolstered by improving business travel trends post-Labor Day. Leisure and business demand remains strong, and we currently expect revenue trends to improve sequentially from the third quarter to the fourth quarter of 2022, despite lower capacity.”
Southwest reported strong revenue performance in Q3 of 2022, despite a negative impact of approximately $18 million due to the flight disruptions caused by Hurricane Ian in late September 2022. This negative impact was more than offset by improving leisure demand and close-in bookings in September 2022.
In addition, Southwest’s operating revenues benefited from its loyalty program, including elevated point redemptions for flights and incremental revenue from its co-brand credit card agreement, as well as increased Upgraded Boarding take-rates following the new digital self-service launch in August 2022.
Based on current trends, fourth quarter 2022 operating revenues are expected to accelerate compared with third quarter 2022, both nominally and compared with their respective 2019 levels, and fourth quarter 2022 managed business revenues are estimated to be down in the range of 20 percent to 25 percent, compared with fourth quarter 2019. So far, the airline continues to experience strong leisure and business revenue trends and strong bookings in Q4 2022, including the holiday time periods.
“We remain focused on maintaining our current momentum and expect to generate strong profits and margins in the fourth quarter of 2022, based on current trends and barring any significant unforeseen events. As we finalize our plan for next year, we remain laser-focused on our goals to grow the full year 2023 profits and margins, excluding special items, year-over-year4, and to generate healthy returns on invested capital for our Shareholders,” added Bob
At the end of Q3, Southwest has 742 aircraft, with 11 -700 aircraft retirements during the quarter. Southwest is contractually scheduled to receive 114 MAX deliveries this year and expects a portion of its deliveries to shift out of 2022 due to Boeing's supply chain challenges and the current status of the -7 certification.
Bob added, "We continue working with Boeing Company to finalize our 2023 aircraft delivery plans; however, we currently expect aircraft delivery delays to persist into 2024. Today, we extended our flight schedule through July 10, 2023, and we currently expect first-quarter 2023 capacity to increase by approximately 10% and second-quarter 2023 capacity to increase by approximately 14 %, both year-over-year. While we have not yet finalized capacity plans for the second half of 2023, and there is uncertainty around the timing of aircraft deliveries, we are building our 2023 capacity plan with a goal to have sufficient aircraft to operate our 2023 flight schedules.”
Southwest reported capital expenditure of $1.1 bn driven primarily by aircraft-related capital spending, as well as technology, facilities, and operational investments, and estimates the 2022 capital spending to be approximately $4.0bn. Southwest’s non-aircraft capital spending in Q3 of 2022 was approximately $900 million.