Southwest Airlines has posted a modest $68 million profit for the fourth quarter of 2021, and despite anticipating losses in January and February, believes it has turned a corner. Incoming CEO Bob Jordan said he believes that the worst is behind them, and is looking forward to a profitable 2022, and a restoration of most of its route network by the end of 2023.
A profitable quarter
Southwest Airlines has done the unthinkable and posted a profit for its most recent quarter. The airline achieved a net income of $68 million for the quarter, and across the year this translated into an income of $977 million. However, taking into account the $2.7 billion of payroll support funding received by Southwest, the consolidated full-year results were a negative $1.3 billion.
Despite the appearance of Omicron somewhat stunting recovery, the airline is optimistic that the pathway ahead is much clearer. Bob Jordan, the current executive vice president of Southwest and soon-to-be CEO commented that he believes the worst is over. In a statement, he said,
“Despite our fourth quarter profit, we had a challenging start to 2022 as we continue to recover from the pandemic. While we made significant progress in 2021, the Omicron variant has delayed the demand improvement we were previously expecting in early 2022. With COVID-19 cases trending downward, the worst appears to be behind us, and we are optimistic about current bookings and revenue trends for March 2022.”
Although Jordan took a positive tone in the earnings release, he did warn that 2022 would bring with it higher unit cost inflation. He also acknowledged the challenges Southwest has faced in ensuring adequate staffing in the face of Omicron, and confirmed that incentive pay for operations employees is being extended through to early February.
Overall, the airline anticipates some losses in January and February, but is forecasting a return to profitability in March 2022. The blip of the early part of the quarter will, Jordan believes, be recovered through the rest of the year. He said,
“Based on our current plan, while we no longer expect to be profitable in first quarter, we expect to be profitable for the remaining three quarters of this year, and for full year 2022. As demand for air travel recovers, we intend to substantially grow available seat miles (ASMs, or capacity) to restore the majority of our route network by the end of 2023.”
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A year of achievements
Despite the obvious challenges facing Southwest over the course of 2021, the airline has demonstrated its tenacity and agility in flying wherever it sees demand. This has resulted in the airline launching service to 14 new airports, including Chicago, Colorado Springs, Syracuse and Jackson, Mississippi.
Over the course of the year, the airline flew almost 20% more flights than it had in 2020, for a total of 1.07 million. Load factors were up 26.1 points, from 52% in 2020 to a much healthier 78.5% average across the year. 81% more passengers flew Southwest in 2021 than did in 2020.
However, the final quarter of the year really demonstrated the airline’s improvements, with load factor in October through December soaring to 81%. The number of passengers flown increased by 126% over the same quarter the previous year, and despite fuel costs rising more than 100%, its cost per available seat mile actually dropped very slightly.
While all eyes are on the pandemic right now, that hasn’t stopped Southwest from thinking about the future. During 2021, the airline announced a long-term goal to be carbon neutral by 2050, and established an action plan to drive down emissions by 20% by 2030. Despite all the headwinds, it looks like Gary Kelly’s final earnings call had plenty of reasons to be cheerful.
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