Dallas-based airline, Southwest Airlines, has reported a loss of $159 million for the first quarter of the year. The loss was due to the financial impact of the airline’s holiday meltdown that occurred in December 2022. The airline had to cancel over 16,000 flights in the final days of December due to staffing software issues that couldn’t keep up with scheduling changes during coast-to-coast storms. The incident resulted in a $325 million revenue impact for the first quarter.
Q1 Performance Compared to Expectations
Southwest Airlines reported an adjusted loss per share of 27 cents in Q1 compared to an expected loss of 23 cents, according to Refinitiv consensus estimates. However, the airline’s total revenue of $5.71 billion was slightly lower than the expected $5.73 billion, but represents a 21.6% increase from year-ago levels. The airline’s net loss of $159 million for the period is an improvement from the same period last year when it lost $278 million.
Revenue Headwinds Expected in Q2
Southwest Airlines expects revenue headwinds to continue into the second quarter, with revenue per available seat mile expected to be down 8% to 10% compared to last year. The airline’s capacity is expected to increase by 14% during the same period. The sales outlook is also impacted by about $300 million “breakage revenue” due to a higher-than-normal amount related to flight credits issued during the pandemic that were set to expire unused.
Southwest Airlines has eliminated expiration dates on flight credits since last summer. The airline expects Q2 costs, excluding fuel, to be up 5% to 8%, including wage accruals for labor contracts that are currently under negotiation, including for its pilots and flight attendants. Despite the challenges, Southwest Airlines forecasts a profit for the three months ending June 30. The airline will hold a call with analysts to discuss the results and its outlook.
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