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Southwest Airlines Reports Adjusted Third Quarter Net Loss of $135 Million on Revenue of $4.7 B

Southwest Airlines has reported and adjusted third quarter net loss of $135 million or ($0.23) per diluted share on operating revenues of $4.7 billion. When PSP3 benefits of $763 million are included, the airline reported a net income of $446 million or $0.73 per share.

Southwest Airlines Reports Third Quarter 2021 Financial Results - Photo Credit: Stephen M. Keller, Southwest Airlines

On Thursday (October 21, 2021), Southwest Airlines reported their third quarter 2021 financial results for the period ending September 30, 2021. The carrier reported an adjusted third quarter net loss of $135 million or ($0.23) per diluted share on revenue of $4.7 billion. When special items are included, primarily $763 million received under the third extension of the U.S. Cares Act Payroll Support Program (PSP3), which was authorized under the American Rescue Plan Act of 2021, the company reported a third quarter net income of $446 million or $0.73 per diluted share. Southwest’s third quarter operating revenue declined year-over-two by 17 percent to $4.7 billion. At September 30, 2021, the airline had $17.0 billion in liquidity, well in excess of outstanding debt totaling $11.2 billion, including $16.0 billion in cash and short-term investments, and a fully available revolving secured credit facility of $1.0 billion.

In Thursday’s announcement, Southwest Airlines’ Chairman of the Board and Chief Executive officer, Gary C. Kelly, said,

“Third quarter 2021 was a challenge for us, operationally. Despite the deceleration of traffic in August and September due to surging COVID-19 cases, the third quarter 2021 demand and revenue performance was quite strong and a dramatic improvement from a year ago. That was a bright and encouraging sign of recovery, and I was especially pleased with July's revenue and profit performance. We were aggressive with our capacity plans for third quarter 2021, coming close to pre-pandemic third quarter 2019 available seat miles. Our active (versus inactive) and available staffing fell below plan and, along with other factors, caused us to miss our operational on-time performance targets, and that created additional cost headwinds. The net effect, including a revenue penalty of $300 million due to the COVID-19 surge, was a loss of $135 million, excluding special items.

“We have reined in our capacity plans to adjust to the current staffing environment, and our on-time performance has improved, accordingly. We are aggressively hiring to a goal of approximately 5,000 new Employees by the end of this year, and we are currently more than halfway toward that goal. Our 2022 capacity planning reflects more conservative staffing assumptions, as well, all compared to historical norms. With respect to our fourth quarter 2021 revenue outlook, while there are lingering effects from the summer COVID-19 surge and recent operational challenges, we are encouraged with renewed momentum in leisure and business traffic, revenues, and bookings—especially over the holidays. Except for higher fuel prices, fourth quarter 2021's overall results are trending better than third quarter 2021.

"I am very proud of our People. They worked especially hard in challenging circumstances. We made good progress in our pandemic recovery in third quarter 2021, and I expect more in fourth quarter. I'm very excited about the demand recovery and our prospects for 2022. Our Leadership has an excellent plan with a laser focus on execution. We are in a very strong financial position, and I thank all of our People for their resilience, their resolve, and their devotion to serving our valued Customers.”

Southwest’s revenue per available seat mile (RASM) declined 15.7 percent compared to Q3 2019, primarily driven by a passenger revenue yield decrease of 15 percent and a year-over-two load factor decrease of 2.8 points. The airline’s third quarter cost per available seat mile (CASM) decreased 16.8 percent versus the third quarter of 2019, and when special items are excluded, CASM was comparable to Q3 2019 levels.

Southwest Airlines ended the third quarter with a fleet of 737 Boeing 737s, including 69 Boeing 737-8s. During Q3 2021, the company took delivery of one 737-8 and doesn’t expect any further deliveries this year. At September 30, 2021, 24 Boeing 737-700s remained in temporary storage. Southwest will return one 700 the lessor during the fourth quarter and recently made the decision to accelerate the retirement of eight company-owned 700s from 2022 to Q4 2021, for a total of 18 aircraft retirements this year. The company expects to close the year with a total of 728 aircraft.

During Q3 2021, Southwest exercised eight Boeing 737-7 options for delivery in 2022, and on October 1st exercised an option for eight additional 737-7 options for delivery in 2023. Including the aforementioned options, Southwest’s order book with Boeing includes 399 MAX firm orders (250 737-7s and 149 737-8s) and 252 MAX options (7s or 8s) for years 2021 through 2031. Over the next 10-15 years, the company expects to replace a significant number of their 461 Boeing 737-700s as part of the airline's fleet modernization program.

Celebrating their 50th year of service, Dallas-based Southwest Airlines (NYSE: LUV) has distinguished itself by offering exemplary customer service delivered by over 56,000 team members. Southwest offers a robust point-to-point network with a strong presence across leisure and business markets. In 2019, the carrier served 130 million passengers. During peak travel seasons, the airline operates more than 4,000 daily departures to 101 destinations across the U.S. and 10 additional countries. According to the U.S. Department of Transportation, based on the number of originating passengers boarded, Southwest has been the largest U.S. domestic carrier since 2003.

In trading Thursday afternoon (October 21, 2021), shares in Southwest Airlines Co. (NYSE: LUV) were down 1.86% at $48.55/share (3:34 PM EDT).

Source: Southwest Airlines


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