Categories Analysis, Industrials
Southwest Airlines (LUV): These are the airline’s expectations for the remainder of the year
Operating revenues in Q2 2022 are expected to be up 8-12% from 2019 levels
Shares of Southwest Airlines Co. (NYSE: LUV) stayed in green territory on Friday. The stock has gained 10% year-to-date. The company reported better-than-expected results for its first quarter of 2022 and expects to be profitable for the remainder of the year. Here is a look at the airline’s expectations for the rest of the year.
Revenue and profitability
Southwest delivered operating revenues of $4.7 billion for the first quarter of 2022, which was more than double compared to the same period a year ago and better than market estimates. However, revenues were down 8.8% compared to Q1 2019. Operating revenues were 91% restored to 2019 levels during Q1 despite managed business revenues being only 45% restored.
While passenger revenues were impacted by the Omicron variant and severe weather during January and February, March witnessed an improvement thanks to a surge in leisure travel and bookings. Leisure and business demand exceeded expectations during March.
Looking into the second quarter of 2022, Southwest expects operating revenue to turn positive versus the second quarter of 2019 and to be up 8-12% from that period.
In Q1, Southwest reported a net loss of $278 million, or $0.47 per share, on a GAAP basis. Adjusted loss per share was $0.32, which was narrower than expected. Despite high unit cost inflation, the company expects to be profitable for the remaining quarters of 2022 and for FY2022. The airline expects to see a healthy profit along with solid operating margins in Q2.
Costs
In terms of non-fuel costs, Southwest is tracking in line with its 2022 cost plan. In Q1 2022, CASM-X increased 17.9% versus Q1 2019, coming at the lower end of the company’s previous guidance range. Looking ahead, Southwest expects to see unit cost pressure from operating at suboptimal productivity levels as well as higher inflationary cost pressures, mainly in salaries, wages and benefits.
In Q2 2022, CASM-X is estimated to increase 14-18% versus the same period in 2019, with roughly half of this increase coming from continued inflationary pressures in both labor and airport rates and the rest from operating at suboptimal capacity and productivity levels. For the full year of 2022, CASM-X is expected to increase 12-16% from 2019 levels.
Fuel price for the second quarter is estimated to be $3.05-3.15 per gallon, which is roughly $0.80 higher than the first quarter fuel price.
Capacity
In Q1 2022, capacity rose 48.6% YoY to 34.38 billion but was down 9.2% compared to Q1 2019. For the second quarter of 2022, capacity is expected to be down approx. 7% from 2019 levels.
Click here to read the full transcript of Southwest Airlines’ Q1 2022 earnings conference call
Looking for more insights on the earnings results? Click here to access the full transcripts of the latest earnings conference calls!
Most Popular
Broadcom (AVGO) reports higher Q3 revenue and profit; results beat estimates
Semiconductor company Broadcom, Inc. (NASDAQ: AVGO) reported higher revenues and adjusted earnings for the third quarter of 2024 amid continued strong demand. The Q3 numbers also topped expectations. Earnings, excluding
Key takeaways from Hewlett Packard’s (HPE) Q3 2024 earnings report
Hewlett Packard Enterprise (NYSE: HPE) has delivered stronger-than-expected third-quarter results amid significant conversion in AI system revenues. The prospects for the company's AI server and edge computing businesses look promising
Hormel Foods (HRL): Factors that put a damper on the food company’s Q3 performance
Shares of Hormel Foods Corporation (NYSE: HRL) were up over 2% on Thursday. The stock is recovering from a fall it took a day ago after the company delivered mixed