Southwest Airlines recorded a record operating profit of $7 billion in the second quarter (Q2) of 2023 driven by what it described as resilient demand in the leisure travel market. The airline reported a net income of $683 million closing the quarter with strong operational performance.
Southwest said that it expects this strong momentum to continue into the year's second half, resulting in a $1.0 billion to $1.5 billion pre-tax profit for the entire year.
Southwest achieved a completion factor of more than 99%, setting a new record in terms of the number of flights, passengers, and bags, resulting in its highest second-quarter performance in a decade.
Bob Jordan, president, and chief executive said that the company had made "great progress" it had made towards its goals in the first half of the year. "To name only a few, we have largely restored our network, developed and are on-track with a robust winter operations plan, implemented a new revenue management system, and added necessary staffing to fully utilise our fleet, ahead of schedule, by the end of the third quarter,” he said.
Southwest Airlines continued its fleet renewal program throughout the second quarter with the arrival of 21 Boeing 737 MAX 8 aircraft. It simultaneously retired 11 of its 737-700 aircraft and ended the quarter with 803 aircraft.
The airline still expects to receive approximately 70 MAX 8 aircraft deliveries from Boeing and retire another 26 737-700s towards the end of the year. If all the upcoming aircraft deliveries and retirements go as planned, the company will end 2023 with 814 aircraft.
Southwest Airlines recently celebrated the delivery of its 800th aircraft.
Southwest reported an increase in operating expenses by 12.1% year-over-year, to $6.2 billion, including slightly higher than predicted fuel costs. Fuel efficiency, however, improved 3.3% year-over-year.
The company paid $214 million in dividends so far and spend $8 million to retire scheduled lease payment.
“Although our network is largely restored, it is not yet optimized. We are working to align our network, fleet plans, and staffing to better reflect the current business environment,” Jordan added. “While business revenues continue to recover, they are not back to pre-pandemic levels—therefore, we are revamping our 2024 flight schedules to reflect post-pandemic changes to Customer travel patterns.”
Southwest estimates its continued network optimization efforts and market development will contribute roughly $500 million in incremental year-over-year pre-tax profits in 2024.