Southwest Airlines has reported a net loss of $219 million for the fourth quarter of 2023. The amount translates to around $0.37 loss per diluted share. Excluding special items, its fourth quarter net income resulted in $233 million ($0.37 per diluted share). The company’s full year net income was $498 million; $0.81 per diluted share. Adjusted net income was $986 million; $1.57 per diluted share.
“As we work urgently to restore our profit margins to historical levels, we believe our 2024 plan provides a line of sight to improve our profitability year-over-year, earn our cost of capital this year, and provide significant progress towards our long-term goal to well exceed our cost of capital,” said Southwest Airlines CEO and president Bob Jordan.
Southwest Airlines Pilots Association had recently approved a five-year 44% pay increase for Southwest pilots in January 2024. Subsequently, its flight attendants had voted in favour of strike authorisation in their battle for a better pay deal with Southwest.
Jordan commented: “Despite inflationary unit cost pressures from new labour agreements and a planned increase in aircraft maintenance, we plan to counter some of those cost pressures through strategic initiatives and already actioned network adjustments, creating operating margin expansion, excluding special items, in 2024.”
Southwest reported operating revenues of $6.8bn for the fourth quarter and $26.1bn for the full year. The fourth quarter operating revenue represents a 10.5% increase year-over-year (YOY) and full year results marked a 9.6% increase YOY. The record revenue performance for the company was bolstered by a healthy leisure demand and continued yield strength, especially during the holiday season. Furthermore, record fourth quarter ancillary revenue, loyalty program revenue, and passengers carried all helped elevate the figures.
Jordan added: “We completed a comprehensive winter action plan, restored our network, reached full utilisation of our fleet, delivered significant new capabilities for our customers, and had our best fourth quarter completion factor in more than a decade. And, importantly, we have maintained the strength of our investment grade balance sheet, despite the extraordinary challenges over the past few years.”
The company’s fourth quarter revenue per available seat mile decreased by 8.9% YOY, however the company had anticipated a higher decrease in its previous guidance. The company claimed higher than expected close-in bookings and continued yield strength helped soften the decrease.
Jordan said: “Our 2024 plan leverages a set of initiatives which, most importantly, includes better aligning the route network to new demand patterns. While it is early in the first quarter, these initiatives are delivering value and we expect them to contribute roughly $1.5 billion in incremental year-over-year pre-tax profits. As a result, we expect double-digit year-over-year operating revenue growth and year-over-year operating margin expansion.”
Southwest currently holds a liquidity of $12.5bn, which is in excess of its outstanding debt of $8bn.