Southwest reports operating revenues of $4.7 billion and a net loss of $278 million so far this year......

Net loss of $278 million

Excluding special items, net loss of $191 million,

Operating revenues of $4.7 billion, down 8.8 percent compared with first quarter 2019

Cash provided by operations of $1.1 billion

Liquidity of $16.7 billion, well in excess of debt outstanding of $10.7 billion

The U.S. low-cost carrier Southwest has released its latest results for the first quarter of 2022 that show the airline is slowly recovering from the COVID pandemic, however, the Omicron variant slowed the recovery somewhat.

Bob Jordan, Chief Executive Officer, stated, "While the impact from the Omicron variant in January and February disrupted our anticipated profit recovery in first quarter 2022, we returned to strong profitability in March 2022 on surging travel demand. First quarter 2022 operating revenues per available seat mile (RASM, or unit revenues) increased slightly compared with first quarter 2019, representing our first quarterly RASM increase relative to respective 2019 levels since the pandemic began. Our operational performance improved during February and March 2022 following acute staffing challenges experienced in January due to the Omicron variant. We have made great progress against our hiring plans for this year, increasing our headcount by approximately 3,300 in first quarter 2022, alone, net of attrition. 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. While we are experiencing inflationary pressure from higher jet fuel prices, our fuel hedge is providing significant protection against rising oil prices.

"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. Barring any unforeseen events and based on current trends, and despite higher fuel prices and managed business revenues and available seat miles (ASMs, or capacity) remaining below pre-pandemic levels, we expect solid second quarter 2022 profits and operating margins, excluding special items3.

"As we focus on the basics, our priorities for 2022 are clear: getting properly staffed and returning to historic operational reliability; restoring our Customer Service advantage; growing our fleet with The Boeing Company's (Boeing) most-modern, fuel-efficient 737 aircraft; adding flights and restoring our network, especially on shorter-haul business routes; investing in enabling technologies for enhanced efficiencies; and producing consistent quarterly profits. Among our primary goals is to return to pre-pandemic levels of productivity as we plan to restore the majority of our route network and better optimize our operations by the end of next year. I am grateful to our People for continuing to demonstrate their resilience and superb Teamwork after more than two years of managing through the pandemic. While it has been an incredibly challenging period, we are greatly encouraged by the progress we are making and believe we are well-positioned for future growth and long-term success with our point-to-point network, low cost and low fare business model, industry-leading balance sheet, and the best Employees and Leadership Team in the industry."

First Quarter 2022 Supplemental Financial Results
(unaudited)

The Company believes certain 2022 measures compared with 2019 are also relevant due to the significant impacts in 2020 and 2021 from the pandemic. Therefore, the below supplemental information is provided for reference.
 

As reported
	Three months ended March 31,
(in millions, except per share and unit costs)	2022	2019	Percent Change
Net income (loss)	$               (278)	$                387	n.m.
Net income (loss) per share, diluted	$               (0.47)	$                0.70	n.m.
Operating revenues	$              4,694	$              5,149	(8.8)
Operating expenses	$              4,845	$              4,644	4.3
Operating expenses, excluding Fuel and oil expense	$              3,841	$              3,629	5.8
Operating expenses, excluding Fuel and oil expense and profitsharing	$              3,804	$              3,541	7.4
RASM (cents)	13.65	13.59	0.4
Passenger revenue yield per RPM (cents)	15.62	15.45	1.1
CASM (cents)	14.09	12.26	14.9
CASM, excluding Fuel and oil expense and profitsharing (cents)	11.06	9.35	18.3
Fuel costs per gallon, including fuel tax	$                2.30	$                2.05	12.2
Revenue passengers carried (000s)	26,029	31,296	(16.8)
Available seat miles (ASMs)	34,384	37,885	(9.2)
Load factor	77.0 %	81.0 %	(4.0) pts.

 

Adjusted for special items
	Three months ended March 31,
(in millions, except per share and unit costs)	2022	2019	Percent Change
Net income (loss)	$               (191)	$                387	n.m.
Net income (loss) per share, diluted	$               (0.32)	$                0.70	n.m.
Operating revenues	$              4,694	$              5,149	(8.8)
Operating expenses	$              4,829	$              4,644	4.0
Operating expenses, excluding Fuel and oil expense	$              3,825	$              3,629	5.4
Operating expenses, excluding Fuel and oil expense and profitsharing	$              3,788	$              3,541	7.0
RASM (cents)	13.65	13.59	0.4
Passenger revenue yield per RPM (cents)	15.62	15.45	1.1
CASM (cents)	14.04	12.26	14.5
CASM, excluding Fuel and oil expense and profitsharing (cents)	11.02	9.35	17.9
Fuel costs per gallon, including fuel tax (economic)	$                2.30	$                2.05	12.2
Revenue passengers carried (000s)	26,029	31,296	(16.8)
Available seat miles (ASMs)	34,384	37,885	(9.2)
Load factor	77.0 %	81.0 %	(4.0) pts.

Southwest Airlines Co.
Condensed Consolidated Statement of Income (Loss)
(in millions, except per share amounts)
(unaudited)

	Three months ended
	March 31,
	2022	2021	Percent Change
OPERATING REVENUES:
Passenger	$    4,135	$    1,712	141.5
Freight	42	43	(2.3)
Other	517	297	74.1
Total operating revenues	4,694	2,052	128.8
OPERATING EXPENSES, NET:
Salaries, wages, and benefits	2,229	1,571	41.9
Payroll support and voluntary Employee programs, net	—	(1,448)	n.m.
Fuel and oil	1,004	469	114.1
Maintenance materials and repairs	211	173	22.0
Landing fees and airport rentals	346	313	10.5
Depreciation and amortization	324	312	3.8
Other operating expenses	731	463	57.9
Total operating expenses, net	4,845	1,853	161.5
OPERATING INCOME (LOSS)	(151)	199	n.m.
OTHER EXPENSES (INCOME):
Interest expense	93	114	(18.4)
Capitalized interest	(9)	(11)	(18.2)
Interest income	(3)	(2)	50.0
Other (gains) losses, net	144	(48)	n.m.
Total other expenses (income)	225	53	n.m.
INCOME (LOSS) BEFORE INCOME TAXES	(376)	146	n.m.
PROVISION (BENEFIT) FOR INCOME TAXES	(98)	30	n.m.
NET INCOME (LOSS)	$      (278)	$       116	n.m.
NET INCOME (LOSS) PER SHARE:
Basic	$     (0.47)	$      0.20	n.m.
Diluted	$     (0.47)	$      0.19	n.m.
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic	592	591	0.2
Diluted	592	609	(2.8)

Southwest Airlines Co.
Reconciliation of Reported Amounts to Non-GAAP Items (excluding special items)
(See Note Regarding Use of Non-GAAP Financial Measures)
(in millions, except per share amounts)(unaudited)

	Three months ended
	March 31,		Percent
	2022	2021	Change
Fuel and oil expense, unhedged	$                       1,207	$                          464
Add: Premium cost of fuel contracts designated as hedges	26	14
Deduct: Fuel hedge gains included in Fuel and oil expense, net	(229)	(9)
Fuel and oil expense, as reported	$                       1,004	$                          469
Add: Fuel hedge contracts settling in the current period, but for which losses were reclassified from AOCI	—	8
Add: Premium cost of fuel contracts not designated as hedges	—	11
Fuel and oil expense, excluding special items (economic)	$                       1,004	$                          488	105.7
Total operating expenses, net, as reported	$                       4,845	$                       1,853
Add: Payroll support and voluntary Employee programs, net	—	1,448
Add: Fuel hedge contracts settling in the current period, but for which losses were reclassified from AOCI	—	8
Add: Interest rate swap agreements terminated in a prior period, but for which losses were reclassified from AOCI	—	1
Add: Premium cost of fuel contracts not designated as hedges	—	11
Deduct: Impairment of long-lived assets	(16)	$                             —
Total operating expenses, excluding special items	$                       4,829	$                       3,321	45.4
Deduct: Fuel and oil expense, excluding special items (economic)	(1,004)	(488)
Operating expenses, excluding Fuel and oil expense and special items	$                       3,825	$                       2,833	35.0
Deduct: Profitsharing expense	(37)	(24)
Operating expenses, excluding Fuel and oil expense, special items, and profitsharing	$                       3,788	$                       2,809	34.9
Operating income (loss), as reported	$                         (151)	$                          199
Deduct: Payroll support and voluntary Employee programs, net	—	(1,448)
Deduct: Fuel hedge contracts settling in the current period, but for which losses were reclassified from AOCI	—	(8)
Deduct: Interest rate swap agreements terminated in a prior period, but for which losses were reclassified from AOCI	—	(1)
Deduct: Premium cost of fuel contracts not designated as hedges	—	(11)
Add: Impairment of long-lived assets	16	—
Operating loss, excluding special items	$                         (135)	$                     (1,269)	(89.4)
Other (gains) losses, net, as reported	$                          144	$                           (48)
Deduct: Mark-to-market impact from fuel contracts settling in current and future periods	(34)	(1)
Deduct: Premium cost of fuel contracts not designated as hedges	—	(11)
Deduct: Unrealized mark-to-market adjustment on available for sale investments	(5)	—
Deduct: Loss on partial extinguishment of convertible and unsecured notes	(72)	—
Other (gains) losses, net, excluding special items	$                            33	$                           (60)	n.m.

 

	Three months ended
	March 31,		Percent
	2022	2021	Change
Income (loss) before income taxes, as reported	$                         (376)	$                          146
Deduct: Payroll support and voluntary Employee programs, net	—	(1,448)
Deduct: Fuel hedge contracts settling in the current period, but for which losses were reclassified from AOCI	—	(8)
Deduct: Interest rate swap agreements terminated in a prior period, but for which losses were reclassified from AOCI	—	(1)
Add: Mark-to-market impact from fuel contracts settling in current and future periods	34	1
Add: Impairment of long-lived assets	16	—
Add: Unrealized mark-to-market adjustment on available for sale investments	5	—
Add: Loss on partial extinguishment of convertible and unsecured notes	72	—
Loss before income taxes, excluding special items	$                         (249)	$                     (1,310)	(81.0)
Provision (benefit) for income taxes, as reported	$                           (98)	$                            30
Add (Deduct): Net income (loss) tax impact of fuel and special items (a)	40	(325)
Benefit for income taxes, net, excluding special items	$                           (58)	$                         (295)	(80.3)
Net income (loss), as reported	$                         (278)	$                          116
Deduct: Payroll support and voluntary Employee programs, net	—	(1,448)
Deduct: Fuel hedge contracts settling in the current period, but for which losses were reclassified from AOCI	—	(8)
Deduct: Interest rate swap agreements terminated in a prior period, but for which losses were reclassified from AOCI	—	(1)
Add: Mark-to-market impact from fuel contracts settling in current and future periods	34	1
Add: Impairment of long-lived assets	16	—
Add: Unrealized mark-to-market adjustment on available for sale investments	5	—
Add: Loss on partial extinguishment of convertible and unsecured notes	72	—
Add (Deduct): Net income (loss) tax impact of special items (a)	(40)	325
Net loss, excluding special items	$                         (191)	$                     (1,015)	(81.2)
Net income (loss) per share, diluted, as reported	$                       (0.47)	$                         0.19
Add (Deduct): Impact of special items	0.16	(2.38)
Add (Deduct): Net impact of net income (loss) above from fuel contracts divided by dilutive shares	0.06	(0.01)
Add (Deduct): Net income (loss) tax impact of special items (a)	(0.07)	0.53
Deduct: GAAP to Non-GAAP diluted weighted average shares difference (b)	—	(0.05)
Net loss per share, diluted, excluding special items	$                       (0.32)	$                       (1.72)	(81.4)

(a) Tax amounts for each individual special item are calculated at the Company's effective rate for the applicable period and totaled in this line item.
(b) Adjustment related to GAAP and Non-GAAP diluted weighted average shares difference, due to the Company being in a Net income position on a GAAP basis versus a Net loss position on a Non-GAAP basis for the quarter ended March 31, 2021.

Southwest Airlines Co.
Comparative Consolidated Operating Statistics
(unaudited)
Relevant comparative operating statistics for the three months ended March 31, 2022 and 2021 are included below. The Company provides these operating statistics because they are commonly used in the airline industry and, as such, allow readers to compare the Company's performance against its results for the prior year period, as well as against the performance of the Company's peers.

 

	Three months ended
	March 31,		Percent
	2022	2021	Change
Revenue passengers carried (000s)	26,029	14,225	83.0
Enplaned passengers (000s)	32,005	17,927	78.5
Revenue passenger miles (RPMs) (in millions) (a)	26,483	14,875	78.0
Available seat miles (ASMs) (in millions) (b)	34,384	23,146	48.6
Load factor (c)	77.0  %	64.3 %	12.7 pts.
Average length of passenger haul (miles)	1,017	1,046	(2.8)
Average aircraft stage length (miles)	765	772	(0.9)
Trips flown	287,751	192,401	49.6
Seats flown (000s) (d)	44,547	29,791	49.5
Seats per trip (e)	154.8	154.8	—
Average passenger fare	$   158.88	$   120.36	32.0
Passenger revenue yield per RPM (cents) (f)	15.62	11.51	35.7
RASM (cents) (g)	13.65	8.86	54.1
PRASM (cents) (h)	12.03	7.40	62.6
CASM (cents) (i)	14.09	8.00	76.1
CASM, excluding Fuel and oil expense (cents)	11.17	5.98	86.8
CASM, excluding special items (cents)	14.04	14.34	(2.1)
CASM, excluding Fuel and oil expense and special items (cents)	11.12	12.24	(9.2)
CASM, excluding Fuel and oil expense, special items, and profitsharing expense (cents)	11.02	12.13	(9.2)
Fuel costs per gallon, including fuel tax (unhedged)	$        2.76	$       1.62	70.4
Fuel costs per gallon, including fuel tax	$        2.30	$       1.63	41.1
Fuel costs per gallon, including fuel tax (economic)	$        2.30	$       1.70	35.3
Fuel consumed, in gallons (millions)	436	286	52.4
Active fulltime equivalent Employees (j)	58,865	56,051	5.0
Aircraft at end of period (k)	722	730	(1.1)

(a) A revenue passenger mile is one paying passenger flown one mile. Also referred to as "traffic," which is a measure of demand for a given period.
(b) An available seat mile is one seat (empty or full) flown one mile. Also referred to as "capacity," which is a measure of the space available to carry passengers in a given period.
(c) Revenue passenger miles divided by available seat miles.
(d) Seats flown is calculated using total number of seats available by aircraft type multiplied by the total trips flown by the same aircraft type during a particular period.
(e) Seats per trip is calculated by dividing seats flown by trips flown.
(f) Calculated as passenger revenue divided by revenue passenger miles. Also referred to as "yield," this is the average cost paid by a paying passenger to fly one mile, which is a measure of revenue production and fares.
(g) RASM (unit revenue) - Operating revenue yield per ASM, calculated as operating revenue divided by available seat miles. Also referred to as "operating unit revenues," this is a measure of operating revenue production based on the total available seat miles flown during a particular period.
(h) PRASM (Passenger unit revenue) - Passenger revenue yield per ASM, calculated as passenger revenue divided by available seat miles. Also referred to as “passenger unit revenues,” this is a measure of passenger revenue production based on the total available seat miles flown during a particular period.
(i) CASM (unit costs) - Operating expenses per ASM, calculated as operating expenses divided by available seat miles. Also referred to as "unit costs" or "cost per available seat mile," this is the average cost to fly an aircraft seat (empty or full) one mile, which is a measure of cost efficiencies.
(j)  Included 8,164 Employees on Extended Emergency Time Off at March 31, 2021.
(k) Included four Boeing 737 Next Generation aircraft in temporary storage as of March 31, 2022. Also included seven Boeing 737 MAX and 59 Boeing 737 Next Generation aircraft in temporary storage as of March 31, 2021.

Southwest Airlines Co.
Condensed Consolidated Balance Sheet
(in millions)
(unaudited)

	March 31, 2022	December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$                               13,098	$                                12,480
Short-term investments	2,642	3,024
Accounts and other receivables	1,692	1,357
Inventories of parts and supplies, at cost	623	537
Prepaid expenses and other current assets	767	638
Total current assets	18,822	18,036
Property and equipment, at cost:
Flight equipment	21,147	21,226
Ground property and equipment	6,472	6,342
Deposits on flight equipment purchase contracts	254	—
Assets constructed for others	9	6
	27,882	27,574
Less allowance for depreciation and amortization	12,945	12,732
	14,937	14,842
Goodwill	970	970
Operating lease right-of-use assets	1,555	1,590
Other assets	978	882
	$                               37,262	$                                36,320
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$                                 1,648	$                                  1,282
Accrued liabilities	1,360	1,624
Current operating lease liabilities	240	239
Air traffic liability	6,406	5,566
Current maturities of long-term debt	415	453
Total current liabilities	10,069	9,164
Long-term debt less current maturities	10,309	10,274
Air traffic liability - noncurrent	2,204	2,159
Deferred income taxes	1,826	1,770
Noncurrent operating lease liabilities	1,277	1,315
Other noncurrent liabilities	1,160	1,224
Stockholders' equity:
Common stock	888	888
Capital in excess of par value	3,940	4,224
Retained earnings	15,551	15,774
Accumulated other comprehensive income	891	388
Treasury stock, at cost	(10,853)	(10,860)
Total stockholders' equity	10,417	10,414
	$                               37,262	$                                36,320

Southwest Airlines Co.
Condensed Consolidated Statement of Cash Flows
(in millions) (unaudited)

	Three months ended March 31,
	2022	2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$            (278)	$              116
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization	324	312
Impairment of long-lived assets	16	—
Unrealized mark-to-market adjustment on available for sale securities	5	—
Unrealized/realized (gain) loss on fuel derivative instruments	34	(7)
Deferred income taxes	(97)	5
Loss on partial extinguishment of convertible and unsecured notes	72	—
Changes in certain assets and liabilities:
Accounts and other receivables	(334)	(234)
Other assets	(44)	(11)
Accounts payable and accrued liabilities	177	(66)
Air traffic liability	885	599
Other liabilities	(105)	(122)
Cash collateral received from derivative counterparties	385	38
Other, net	31	15
Net cash provided by operating activities	1,071	645
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(510)	(95)
Assets constructed for others	(4)	—
Purchases of short-term investments	(925)	(1,324)
Proceeds from sales of short-term and other investments	1,300	1,218
Net cash used in investing activities	(139)	(201)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Payroll Support Program loan and warrants	—	511
Proceeds from Employee stock plans	6	13
Payments of long-term debt and finance lease obligations	(93)	(67)
Payments for repurchases and conversions of convertible debt	(230)	—
Other, net	3	7
Net cash provided by (used in) financing activities	(314)	464
NET CHANGE IN CASH AND CASH EQUIVALENTS	618	908
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	12,480	11,063
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$        13,098	$        11,971

 

Want me in your inbox? Follow here for email updates Air101 here.