South West predicts continued losses as bookings slow following holiday slump

South West predicts continued losses as bookings slow following holiday slump

Travelers check in at a Southwest Airlines ticket counter during the busy Christmas holiday season at Orlando International Airport on December 28, 2022 in Orlando, Florida.

Paul Hennessey | Anadolu Agency | Getty Images

South West Airlines said Thursday it expects its holiday slump to continue to weigh on its results, but said it still expects to be profitable this year.

Southwest shares were down about 4% in afternoon trading.

The carrier reported a net loss of $220 million for the fourth quarter after travel chaos spiked spending and cost it millions in revenue during what was expected to be the busiest travel period since before the Covid pandemic.

“So far in January 2023, the company has seen an increase in flight cancellations and a deceleration in bookings, primarily for travel in January and February 2023, which are believed to be associated with operational disruptions in December 2022,” said Southwest in a quarterly report. report.

Analysts had expected earnings per share of 19 cents for the first quarter, based on estimates compiled by Refinitiv.

The Dallas-based airline, however, said booking trends looked positive in March and forecast first-quarter revenue to increase 20% to 24% from a year ago with capacity up 10%. He also estimated that fuel and other costs would be higher than he had previously estimated.

Southwest’s loss in the fourth quarter compares to a profit of $68 million in the same period in 2021. Its record revenue of $6.17 billion was up more than 22% from the ‘last year.

This is how the southwest carried out in the fourth quarter, relative to Wall Street expectations based on Refinitiv consensus estimates:

  • Adjusted loss per share: 38 cents against an expected loss of 12 cents.
  • Total income: $6.17 billion vs $6.16 billion expected.

The airline said the massive cancellations hit its pretax earnings of $800 million, consistent with its estimate earlier this month of an impact of between $725 million and $825 million.

Southwest canceled about 16,700 flights from Dec. 21-31 after harsh winter conditions swept across the United States

While rival airlines had largely recovered by Christmas from the wintry weather, Southwest’s technology was unable to process all of the flight changes and crews had to call the carrier for a reschedule. The airline decided to cut most of its flights in the following days to reset its operation, CEO Bob Jordan said earlier this month.

Southwest said on Thursday it had returned the thousands of misplaced bags over the holidays, a process that included hiring fedex and others. The airline has issued nearly all customer refunds while refunds for alternative travel are more than 80% complete, Ryan Green, chief commercial officer of Southwest, said during the company’s quarterly call.

Some reimbursements are more complicated and include customer expenses like dog sitting due to travel disruptions, CEO Jordan told CNBC earlier this month.

The Department of Transportation is investigating whether Southwest’s vacation schedules were “unrealistic,” a spokesperson said late Wednesday.

Despite the rocky year-end, Southwest posted a profit of $539 million for 2022. That’s still a 45% drop from a year earlier, though.

For the full year 2023, it plans to increase flights by up to 17%, post new profit and increase margins, echoing the optimistic outlook shared by rivals like American, Delta and United.