US carrier Southwest Airlines has announced its 2023 Q1 financial results, reporting a net loss which it attributes to the disruption experienced in December 2022.
Operational disruption and net loss
In a statement on 27 April, Southwest announced a net loss of 159 million USD. It was reported the operational disruption experienced in December 2022 resulted in an impact of 325 million USD on revenue.
The carrier stated the negative impact, and its net loss, was primarily experienced in the months of January and February. This was due to cancellations of holiday return travel and a slowing in bookings for travel in the affected months.
Bob Jordan, President and Chief Executive Officer, said, “As expected, we incurred a first quarter 2023 net loss that resulted from the negative financial impact of approximately $380 million pre-tax, or $294 million after-tax, related to the December 2022 operational disruption.”
However, March experienced a recovery that was reported as “robust” and driven by strong yields and strength in the company’s Rapid Rewards redemptions.
Despite the overall net loss for the quarter, the airline announced strong revenue performance. It reported a record first-quarter operating revenue of 5.7 million USD. This was an over 21% increase year-on-year which was in line with the previously published company guidance.
March lead the way again with revenue performance in the year almost equal to the levels in March 2019, prior to the COVID-19 pandemic.
“Our operational performance was also strong in first quarter 2023. Southwest ranked number two in domestic on-time performance year-to-date through March 2023, as our People successfully navigated nine named storms.”
“We continue to make operational investments and remain intensely focused on running a safe, reliable, and efficient operation while delivering our legendary Customer Service,” Jordan added.
The airline finished the quarter with a liquidity of 12.7 million USD and an outstanding debt of USD 8 billion.
Revenue per available seat mile (RASM) increased by almost 10% in the quarter compared to the previous year. This was reportedly driven by an increase in passenger yield of almost 11% and an increase in load factor of 0.6%.
Updated outlook for 2023
The airline’s updated outlook for the year shows booking performance has returned to pre-pandemic levels. This is attributed to strong leisure demand and yields as the peak summer season approaches.
Due to this, the company continues its expectations that expect further recovery in managed business revenues in Q2, created by anticipated growth in corporate accounts and passengers.
However, it also warns that the travel environment continues to be choppy as travel habits evolve following the pandemic and the current uncertain economic climate.
The airline outlined its goal to manage inflationary cost increases in this uncertain economic environment so it can maintain its “competitive cost advantage.”
The Southwest network is due to be restored to pre-pandemic levels by the end of 2023. The company president praised the efforts of the company employees for their focus on the company’s focus to its customers.
Jordan said, “Based on current revenue trends and our cost outlook… we expect solid profits in second quarter 2023 and continue to expect solid profits and year-over-year growth in both margins and return on invested capital for full year 2023.”