While Southwest Airlines’ full-year result was a net profit, it ended the year with a net loss of $220 million in Q4 2022, largely due to the meltdown it experienced during the festive season.
Overall, the carrier’s full-year profit was $539 million, despite the $220 million loss in the last quarter of the year. That loss was largely driven by the operational meltdown of its operations between Christmas and New Year, which according to Southwest Airlines resulted in over 16,700 canceled flights. The cancelations forced the company to write off $800 million. Previously, it estimated that the impact would be between $725 million and $825 million. Around half of that sum ($400 million to $425 million) would be lost revenue, while the rest would be travel expense reimbursements, the value of its loyalty program points, and premium pay and compensation for employees.
Nevertheless, the airline’s pilot union, Southwest Airlines Pilots Association (SWAPA), has announced that it will call upon its members to vote for a strike on May 1, 2023. Following the count of the voting at the end of the same month, SWAPA will proceed further regarding its industrial action.
“With regard to the operational disruptions, I am deeply sorry for the impact to our Employees and Customers. We have swiftly taken steps to bolster our operational resilience and are undergoing a detailed review of the December events,” commented Bob Jordan, the Chief Executive Officer (CEO) of Southwest Airlines. Jordan reiterated that the airline’s board has established an Operations Review Committee tasked with helping the airline to oversee its response to the meltdown.
The meltdown has seemingly impacted customer confidence, as Southwest Airlines indicated that in January 2023 it ‘has experienced an increase in flight cancellations and a deceleration in bookings, primarily for January and February 2023 travel, which are assumed to be associated with the operational disruptions in December 2022’.
‘As a result, the Company currently estimates a negative revenue impact in the range of $300 million to $350 million in the first quarter of 2023’.
Nevertheless, bookings are strong from the start of March 2023, and yields should be equal to those seen in March 2019. By the end of 2022, Southwest Airlines had 770 aircraft, as it took on 68 Boeing 737 MAX-8 aircraft and retired 26 737-700s. Still, it expected to receive a total of 114 aircraft, but supply chain constraints and the fact that the 737 MAX-7 is still not certified delayed those deliveries.
Following discussions with Boeing, the airline expects to receive 100 aircraft in 2023, despite the fact that contractual agreements with the manufacturer initially covered 136 jets to be handed over to Southwest Airlines, split between 31 737 MAX-7 and 105 737 MAX-8s.
‘Given current supply chain and aircraft delivery delays, the Company will continue working with Boeing to solidify future delivery dates,’ concluded the carrier.