Southwest Airlines (LUV): A look at the company’s projections for the coming quarter

Shares of Southwest Airlines Co. (NYSE: LUV) were up slightly on Monday. The stock has dropped 14% year-to-date and 30% over the past 12 months. The airline industry is seeing a healthy pickup as pent-up demand drives leisure travel and Southwest has benefited from this trend. Here’s a look at the company’s expectations for the coming quarter:

Revenue and profits

In the first quarter of 2022, Southwest’s operating revenues fell 8.8% to $4.7 billion compared to the first quarter of 2019. During April, the company saw strong leisure bookings for spring and summer travel and an improvement in managed business revenue trends. Load factors and bookings for summer travel continue to remain strong and on the heels of strong revenue performance in April and May, strength in passenger bookings and yield continued in June.

Managed business revenues continued to improve and were down around 31% and 23% in April and May 2022 respectively compared to 2019. Southwest currently expects managed business revenue for the second quarter of 2022 to be down 20-25% compared to the same period in 2019.

For the second quarter of 2022, Southwest expects operating revenue to increase 12-15% compared to 2019. The company continues to expect solid profits, excluding special items, in Q2 and for the remaining quarters of this year and also for the full year of 2022.

Capacity

In Q1 2022 available seat miles (ASM) or capacity was down 9.2% to 34.3 billion compared to Q1 2019. For the second quarter of 2022, Southwest expects capacity to be down around 7% compared to the same period in 2019. The company estimates capacity for the second half of 2022 to be roughly flat and for the full year of 2022 to decrease approx. 4% compared to their respective 2019 levels. Load factor is expected to be 85-87% for Q2.

Costs

In Q1 2022, operating expenses per available seat mile, excluding fuel and oil expense, profitsharing, and special items (CASM-X), increased 17.9% compared with Q1 2019. For Q2 2022, CASM-X is estimated to increase 14-18% compared to the same period in 2019. Economic fuel costs per gallon are expected to range between $3.30-3.40 in Q2.

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