Southwest Airlines LUV reported another drop in the first quarter of the year, trying to shake off a brutal holiday period that saw the U.S. second largest airline suffer a massive operations letdown.
Southwest reported an adjusted loss per share of $0.27, more than analyst estimates of a loss of $0.22, causing the company to lose $159 million in the quarter. The quarter's revenue surpassed predictions of $5.73 billion.
As expected, we incurred a net loss in the first quarter of 2023 that resulted from the negative financial impact of approximately $380 million pre-tax, or $294 million after-tax, related to the December 2022 operational disruption, Southwest CEO Bob Jordan said in a statement. The most significant impact of the increase in revenue was caused by a negative revenue impact of approximately $325 million, as a result of cancellations of holiday return travel and a deceleration in bookings for January and February 2023 travel. The operational meltdown that forced Southwest to cancel more than 16700 flights during the holidays has cost the airline more than $800 million. The Department of Justice said on Monday that Southwest engaged in unrealistic flight scheduling which is illegal under federal law and that Southwest Airlines provided timely refunds and reimbursements to affected passengers as required.
Adding potential insult to injury, just last week hundreds of Southwest Airlines flights were delayed and a temporary halt to operations was instituted following a data connection issue, though the ground stop was soon lifted. 1,820 flights were delayed due to the problem, according to Flightaware data.
Despite these problems, Jordan said travel demand and revenue trends in March 2023 were rebounding, resulting in solid profitability for the month and record first quarter revenue. Southwest said revenue for available seat mile RASM, a widely watched airline metric of efficiency, is expected to drop 8%-11% in the 2nd quarter compared to last year as capacity rose 14%.
Looking ahead, Southwest anticipates flight reductions as the airline will only receive around 70 Boeing 737 Max - 8 jets this year, instead of previous guidance of 90, as Boeing works through a production issue with those jets.