Categories Analysis, Industrials

Southwest Airlines (LUV): A look at the plans the airline has outlined for the near term

Operating revenue for Q4 2022 is expected to increase 13-17% from Q4 2019

Shares of Southwest Airlines Co. (NYSE: LUV) were down 2% on Thursday. The stock has dropped 13% thus far this year. The airline industry continues to pick up momentum as travel trends continue to improve. Meanwhile, Southwest remains optimistic about its own outlook for the near term. Here’s a look at the plans it has laid out for this period:

Q4 2022

At its Investor Day earlier this month, Southwest laid out its fourth quarter 2022 outlook which remained largely unchanged except for fuel costs per gallon which are now expected to decline by $0.05 versus the previous guidance.

Operating revenue for Q4 2022 is expected to increase 13-17% from Q4 2019. The company is seeing strong leisure and business revenue trends in the fourth quarter and expects strong profits and margins. However, managed business revenues are still estimated to be down 20-25% from Q4 2019.

Capacity is expected to be down around 2% while non-fuel unit costs (CASM-X) is estimated to be up 14-18% compared to Q4 2019. Fuel costs per gallon are now projected to range between $3.10-3.20 versus the previous outlook of $3.15-3.25.

Southwest-Airlines-Q3-2022-Earnings-Infographic

Q1 and FY2023

For the first quarter of 2023, Southwest expects capacity to be up approx. 10% compared to the same period in 2022. CASM-X is expected to be flat to up 2% versus Q1 2022 and fuel costs per gallon are estimated to range between $3.00-3.10.

Based on current bookings trends, the company expects to see strong leisure revenue in Q1 2023 along with a continued improvement in managed business revenue. CASM-X trends are expected to improve from the first half of 2023 to the second half. CASM-X is expected to decrease 4-6% year-over-year during 2H23.  

For the full year of 2023, capacity is expected to be up approx. 15% compared to 2022. CASM-X is estimated to be down 1-3% from last year. Fuel costs per gallon are projected to come between $2.85-2.95. Southwest expects to have 841 aircraft in its fleet at the end of 2023. Capex is expected to range between $4.0-4.5 billion for the full year.

FY2022

In FY2022, Southwest expects capacity to be down approx. 4.5% from 2019. CASM-X is expected to be up 14-15% from 2019. Economic fuel costs per gallon are expected to be $3.05-3.15. Capex is estimated to be $4 billion. The company expects to have 768 aircraft in its fleet at the end of the year.

Click here to read the full transcript of Southwest Airlines’ Q3 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!

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