Southwest Airlines Co. ( LUV Quick Quote LUV - Free Report) reported fourth-quarter 2022 loss of 38 cents per share, wider than the Zacks Consensus Estimate of a loss of 3 cents. In the year-ago reported quarter, LUV had reported earnings of 14 cents per share.
Operational disruptions in late December resulted in more than 16,700 flight cancellations. As a result, LUV had to bear a fourth-quarter pre-tax negative impact of almost $800 million (or $620 million on an after-tax basis), which led to a fourth-quarter 2022 net loss.
Revenues of $6,172 million lagged the Zacks Consensus Estimate of $6,270.9 million but improved 22.2% year over year. The company’s top line also benefited from its loyalty program, including elevated point redemptions for flights and incremental revenues from its co-brand credit card agreement, along with increased Upgraded Boarding take-rates following the new digital self-service launch in August 2022. However, LUV’s fourth-quarter 2022 revenues were unfavorably impacted by almost $410 million due to the flight cancellations in December 2022.
Airline traffic, measured in revenue passenger miles, rose 5.4% year over year to 31.30 billion in the quarter under review. Capacity or available seat miles (ASMs) climbed 2.2% year over year to 37.49 billion. Load factor (percentage of seats filled by passengers) improved to 83.5% from 81% in the year-ago quarter.
Passenger revenue per available seat mile (a key measure of unit revenues) ascended 19% year over year to 14.78 cents. Revenue per available seat mile improved 19.5% to 16.46 cents.
Operating Expenses & Income
In the fourth quarter, Southwest incurred an operating loss (as reported) of $386 million against an operating income of $195 million in the year-ago period. On an adjusted basis (excluding special items), the company reported an operating loss of $344 million against an income of $209 million. Total adjusted operating expenses (excluding profit sharing, special items, fuel and oil expenses) increased 33.9%.
Fuel cost per gallon (inclusive of fuel tax: economic) rose 41.3% to $3.18. Consolidated unit cost or cost per available seat mile (CASM), excluding fuel, oil and profit-sharing expenses, and special items, increased 31% year over year.
Southwest Airlines ended the fourth quarter with cash and cash equivalents of $9,492 million compared with $10,443 million at the end of September 2022. As of Dec 31, 2022, the company had long-term debt (less current maturities) of $8,046 million compared with $8,315 million at the end of September 2022.
Q1 & Full-Year Outlook
For first-quarter 2023, operating revenues are expected to register 20-24% year-over-year growth. ASMs are estimated to improve 10% from the year-ago reported figure. Economic fuel costs per gallon are expected to be $3.25 to $3.35. LUV expects CASM, excluding fuel, oil and profit-sharing expenses, and special items, to increase 2-4% in the first quarter from the comparable period in 2022. Interest expenses are expected to be $65 million in the first quarter.
For 2023, Southwest expects capacity to improve 16-17% from the 2022 level. Economic fuel costs per gallon are estimated between $2.90 and $3.00. CASM, excluding fuel, oil and profit-sharing expenses, and special items, is anticipated to decrease 6-8% in 2023 from 2022.
Interest expenses are expected to be $250 million in 2023. The effective tax rate is expected to be 23-24% in the year. Capital expenditure is anticipated to be $4-$4.5 billion for 2023.
Currently, Southwest Airlines carries a Zacks Rank #3 (Hold). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here . Performance of Other Transportation Companies United Airlines’ ( UAL Quick Quote UAL - Free Report) fourth-quarter 2022 earnings of $2.46 per share beat the Zacks Consensus Estimate of $2.07. In the year-ago quarter, UAL incurred a loss of $1.60 per share when air-travel demand was not as buoyant as in the current scenario. The fourth quarter of 2022 was the third consecutive profitable quarter at UAL since the onset of the pandemic.
Operating revenues of $12,400 million beat the Zacks Consensus Estimate of $12,230 million. UAL’s revenues increased 51.37% year over year due to upbeat air-travel demand. The optimistic air-travel demand scenario is also evident from the fact that total operating revenues increased 13.9% from fourth-quarter 2019 (pre-coronavirus) levels.
Delta Air Lines’ ( DAL Quick Quote DAL - Free Report) fourth-quarter 2022 earnings (excluding 19 cents from non-recurring items) of $1.48 per share beat the Zacks Consensus Estimate of $1.29 per share. DAL reported earnings of 22 cents per share a year ago, dull in comparison to the current scenario, as air-travel demand was not so buoyant then.
DAL reported revenues of $13,435 million, which surpassed the Zacks Consensus Estimate of $13,030.3 million. Driven by the high air-travel demand, total revenues increased more than 41.87% on a year-over-year basis.
J.B. Hunt Transport Services, Inc.’s ( JBHT Quick Quote JBHT - Free Report) fourth-quarter 2022 earnings of $1.92 per share missed the Zacks Consensus Estimate of $2.45 and declined 16% year over year.
JBHT’s total operating revenues of $3,649.62 million also lagged the Zacks Consensus Estimate of $3,796.8 million. The top line jumped 4.4% year over year. Total operating revenues, excluding fuel surcharges, fell 2.9% year over year.