LONDON – Dallas based carrier Southwest Airlines has released its financial statements for the first 9 months of 2022. Considered one of the big 4 airlines in the United States when measured on passengers carried, its operating revenues have increased over 10 percent when compared to the same time period in 2019 – bringing in 6.2 billion dollars during the 3 months to the end of September.
Hurricane Ian losses
The strong performance comes even thought airline was disrupted considerably by Hurricane Ian. Suffering approximately 18 million dollars worth of flight disruption which brought destruction to large areas of American and the Caribbean at the end of September.
“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 third quarter to fourth quarter 2022, despite lower capacity,” said Bob Jordan, Chief Executive Officer for Southwest.
Fuel hedging strategy
Overall fuel costs for the quarter averaged out at $3.34 per gallon, this was supported by Southwest’s multi-year fuel hedging programme, something that has helped significantly offset the cost of rising fuel costs this quarter. Aircraft fuel efficiencies were helped to the tune of one percent by an increase in Boeing MAX aircraft when compared to the same period 2 years ago.
“Our fuel hedging strategy continues to provide protection against persistently high jet fuel prices, and we are 61 percent hedged in fourth quarter 2022 and 50 percent hedged in full year 2023. We continue to execute well against our full year 2022 non-fuel cost guidance, despite cost headwinds due to operating at suboptimal productivity levels and significant inflationary cost pressures.”
“We remain focused on maintaining our current momentum and expect to generate strong profits and margins in fourth quarter 2022, based on current trends and barring any significant unforeseen events,” continued Jordan.
Receipt of new 737 MAX aircraft
Scheduled to receive 114 MAX Boeing aircraft this year, 23 of the -8 variant were delivered during Q3, which takes the total for the year to 35. Although the airline is anticipating needing to push some of these deliveries out into 2023 and 2024. This based on both Boeing’s continuing difficulties in the supply chain, and the well documented status around the -7 MAX certification.
Irrespective of these delivery challenges, the carrier is building its plan to have sufficient aircraft to support 2023 flight schedule’s, where they will look to restore the disrupted network of the last 3.5 years
Jordan added “We plan to allocate the vast majority of new 2023 capacity to network restoration and stronghold Southwest markets, which we consider to be lower-risk growth.”
“We currently expect our route network to be approximately 90 percent restored by summer 2023, and fully restored by December 2023, compared with 2019 flight levels in pre-pandemic markets.” when detailing the next 12 months planning strategy.
Southwest Airlines outlook
Looking toward quarter 4 and the end of 2022, Southwest anticipates a spike in bookings for both leisure and business travel, and forecasts accelerated operating revenues which will be helped in part by the United States holiday travel season towards Thanksgiving.
Longer term growth is also being looked at, as the airline has brought forward a number of new aircraft deliveries from 2030 to 2026 and 2031 to 2030. This again time dependant on the FAA granting certification for the -7 variant of the 737 MAX.
Despite the Covid-19 pandemic and the local disruption caused by Hurricane Ian, the outlook is bright, and the airline is focussed on its goals to grow full year profits and margins year over year.