Southwest Airlines reported a fourth quarter (Q4 2022) net loss of US $220 million or US $0.37 loss per diluted share and said it expects worse for the first quarter of 2023.
The Q4 2022 loss was widely seen as unsurprising after the carrier cancelled almost 17,000 flights in late December as its IT systems failed to cope with the impact of winter storms on scheduling updates.
The cancellations took the gloss off record fourth quarter and full year operating revenues of US $6.2bn and $23.8bn, respectively, with Bob Jordan, president and chief executive, saying "operational disruptions in late December, which resulted in more than 16,700 flight cancellations" meant a a fourth quarter pre-tax negative impact of approximately US $800 million.
The carrier reported liquidity of US $13.3bn and excess of debt outstanding of US $8.1bn.
The hit in turn meant a fourth quarter 2022 net loss, Jordan confirmed, adding that the full-year outcome was better for the carrier. "Despite the negative financial impacts in first quarter 2022 due to the Omicron variant and in fourth quarter 2022 due to the operational disruptions, we generated full year 2022 net income, excluding special items, of US $723 million," he said.
"With regard to the operational disruptions, I am deeply sorry for the impact to our employees and customers. We have swiftly taken steps to bolster our operational resilience and are undergoing a detailed review of the December events," Jordan said.
"Based on current revenue and cost trends, we currently expect a first quarter 2023 net loss. However, we are encouraged by current booking trends in March 2023. Our 2023 plan continues to support solid profits with year-over-year margin expansion for full year 2023," Jordan said.
“Thus far in January 2023, the Company has experienced an increase in flight cancellations and a deceleration in bookings, primarily for January and February 2023 travel, which are assumed to be associated with the operational disruptions in December 2022,” the carrier reported in a filing to the Securities and Exchange Commission (SEC), in which it wrote that Q1 2023 losses could hit US $500 million.
The carrier faces the prospect of a US government investigation into the Christmas flights meltdown, with a transportation department spokesperson telling CNBC on Wednesday it was “probing whether Southwest executives engaged in unrealistic scheduling of flights which under federal law is considered an unfair and deceptive practice".