Dallas-based Southwest Airlines reported a $278 million net loss for the first quarter of the year, but officials said a strong March saw the company return to pre-pandemic levels, and they expect a strong remainder of 2022.
Bob Jordan, Southwest’s chief executive officer, said the impact of the Omicron variant in January and February disrupted profit recovery, but a surge in travel demand in March increased operating revenues to above those of the first quarter of 2019, the first revenue increase since the coronavirus pandemic began.
The company reported that this year’s first-quarter operating revenues of $4.69 billion were down 8.8% compared to the first quarter of 2019, with an adjusted loss of 32 cents per share.
Omicron led to staffing challenges out of the gate for 2022, and Jordan said the airline has worked since then to strengthen its workforce by 6,500 so far this year. The company additionally plans to hire over 10,000 new employees, including 1,200 pilots, by the end of the year.
“We remain intensely focused on our hiring and training efforts as we work diligently to restore our network and position the company for future growth,” Jordan said in a conference call regarding the earnings release.
Jordan said the airline has been working to balance staffing constraints with higher travel demand. This week, the airline announced a reduction in summer flight schedules on top of the more than 14,000 flights it canceled earlier this spring. The company will operate at a 7% decreased capacity compared to June 2019.
The CEO said he remains “cautiously optimistic” that the reduction will be enough to keep operations balanced between staffing and travel demand “while setting [Southwest] up for resuming more material growth in 2023.”
According to Andrew Watterson, Southwest’s executive vice president, the airline has adjusted flight schedules through Labor Day.
“In terms of network restoration, we will be roughly 80% restored by June based on trips,” he said in the call. “And based on our full-year capacity guidance of down 4% versus 2019, we expect to be roughly 85% restored by December.”
Higher jet fuel prices also present additional challenges, but Jordan said the airline is managing the situation through a fuel hedge, and the outlook for the remaining quarters of 2022 is positive.
“Based on current plans and expected continued strong bookings, we continue to expect to be solidly profitable for the remaining three quarters of this year, and for full-year 2022,” Jordan said.
The company predicts revenue to be 8% to 12% higher in the second quarter than during the same period in 2019, despite a reduction in capacity and leaning on higher prices as demand increases.
According to The Associated Press, Southwest’s average fare was $159 in the first quarter, up 32% from 2021. The company has raised fares once so far this year and is banking on higher averages paid by consumers as demand grows and cheaper last-minute fares become harder to come by.
“As you see that kind of strength, seats are going to sell out faster and customers are going to see higher fares,” Jordan said. “So far, we don’t see any dampening of demand.”
The airline’s $4.69 billion in revenue is more than double what it was in 2021 and 91% of pre-pandemic revenue in 2019.
“Our financial position and ample liquidity allow us to continue investing for the future so that we are ready to resume growth as soon as we are first able to restore our network and get staffing to desired levels. And we intend to grow,” Jordan said. “We are a growth airline. We have great momentum, and we are excited about the ample opportunities in front of us.”
