DALLAS, Oct. 27,
2022 /PRNewswire/ -- Southwest Airlines Co. (NYSE:
LUV) (the "Company") today reported its third quarter 2022
financial results:
- Net income of $277 million, or
$0.44 per diluted share
- Net income, excluding special items1, of
$316 million, or $0.50 per diluted share
- Record third quarter operating revenues of $6.2 billion
- Liquidity2 of $14.7
billion, well in excess of debt outstanding of $8.7 billion
Bob Jordan, Chief Executive
Officer, stated, "We are pleased to report solid third quarter 2022
profits and record third quarter operating revenues. Following
record summer leisure travel demand, revenue trends remained strong
in September 2022, bolstered by
improving business travel trends post-Labor Day. Leisure and
business demand remains strong, and we currently expect revenue
trends to improve sequentially from third quarter to fourth quarter
2022, despite lower capacity. Our fuel hedging strategy continues
to provide protection against persistently high jet fuel prices,
and we are 61 percent hedged in fourth quarter 2022 and 50 percent
hedged in full year 2023. We continue to execute well against our
full year 2022 non-fuel cost guidance, despite cost headwinds due
to operating at suboptimal productivity levels and significant
inflationary cost pressures. We remain focused on maintaining our
current momentum and expect to generate strong profits and margins
in fourth quarter 2022, based on current trends and barring any
significant unforeseen events.
"Our thoughts remain with those impacted by Hurricane Ian. We
quickly resumed full service to all affected airports with the
exception of Southwest Florida
International Airport in Fort
Myers, which is currently expected to operate a reduced
flight schedule through at least the end of this year.
"I am grateful to our Employees for their continued focus on
Teamwork, Customer Service, and operational execution. I am very
pleased that we were able to reward our Aircraft Appearance
Technicians—represented by the Aircraft Mechanics Fraternal
Association (AMFA)—through a new five-year agreement, which was
ratified earlier this month and provides immediate and future
compensation increases for nearly 170 Employees. Additionally, we
recently reached a tentative agreement with the International
Association of Machinists and Aerospace Workers (IAM), who
represent our Customer Service Agents, Customer Representatives,
and Source of Support Representatives. The tentative agreement
requires membership ratification and, if ratified, provides
immediate and future compensation increases for more than 8,000
Employees. It remains a high priority to reach agreements on all of
our open Labor contracts and reward our superb Employees with wage
increases as soon as possible.
"We continue working with The Boeing Company (Boeing) to
finalize our 2023 aircraft delivery plans; however, we currently
expect aircraft delivery delays to persist into 2024. Today, we
extended our flight schedule through July
10, 2023, and we currently expect first quarter 2023
capacity to increase approximately 10 percent and second quarter
2023 capacity to increase approximately 14 percent, both
year-over-year. While we have not yet finalized capacity plans for
second half 2023, and there is uncertainty around the timing of
aircraft deliveries, we are building our 2023 capacity plan with a
goal to have sufficient aircraft to operate our 2023 flight
schedules, as originally published, in an effort to enhance
operational reliability. We plan to allocate the vast majority of
new 2023 capacity to network restoration and stronghold Southwest
markets, which we consider to be lower-risk growth. We currently
expect our route network to be approximately 90 percent restored by
summer 2023, and fully restored by December
2023, compared with 2019 flight levels in pre-pandemic
markets.
"We continue to estimate full year 2023 operating expenses per
available seat mile, excluding fuel and oil expense, special items,
and profitsharing3 (CASM-X) to decrease compared
with full year 2022, which includes estimated wage rate accruals
for all workgroups beginning April 1,
2022 and forward. Fleet utilization is expected to be
limited by Pilot staffing constraints for the majority of 2023,
resulting in continued cost headwinds due to operating at
suboptimal productivity levels until we are able to optimize
staffing with our fleet—which is foundational to our plan to
improve operating leverage. Due to operating at suboptimal
productivity levels and ongoing inflationary cost pressures, first
half 2023 CASM-X3 is currently expected to be in
the range of flat to up two percent compared with first half 2022.
We currently expect our year-over-year capacity growth rate in
second half 2023 to accelerate relative to our year-over-year
capacity growth rate in first half 2023. As such, second half 2023
CASM-X3 is currently expected to decrease in the
low-to-mid single digit range compared with second half 2022.
"As we finalize our plan for next year, we remain laser-focused
on our goals to grow full year 2023 profits and margins, excluding
special items, year-over-year4, and to generate healthy
returns on invested capital for our Shareholders."
Guidance and Outlook:
The following tables introduce or update selected financial
guidance for fourth quarter 2022 and full year 2022, as
applicable:
|
|
|
|
|
|
|
|
|
|
|
|
4Q 2022 Estimation
|
|
|
|
|
|
Operating revenue compared with 2019
(a)
|
|
|
|
|
|
|
|
|
|
|
|
Up 13% to 17%
|
|
|
|
|
|
ASMs compared with 2019 (b)
|
|
|
|
|
|
|
|
|
|
|
|
Down ~2%
|
|
|
|
|
|
Economic fuel costs per
gallon1,5
|
|
|
|
|
|
|
|
|
|
|
|
$3.15 to $3.25
|
|
|
|
|
|
Fuel hedging premium expense per
gallon
|
|
|
|
|
|
|
|
|
|
|
|
$0.03
|
|
|
|
|
|
Fuel hedging cash settlement gains per
gallon
|
|
|
|
|
|
|
|
|
|
|
|
$0.37
|
|
|
|
|
|
ASMs per gallon (fuel
efficiency)
|
|
|
|
|
|
|
|
|
|
|
|
77 to 79
|
|
|
|
|
|
CASM-X compared with
20193
|
|
|
|
|
|
|
|
|
|
|
|
Up 14% to 18%
|
|
|
|
|
|
Scheduled debt repayments
(millions)
|
|
|
|
|
|
|
|
|
|
|
|
~$320
|
|
|
|
|
|
Interest expense (millions)
|
|
|
|
|
|
|
|
|
|
|
|
~$70
|
|
|
|
|
|
|
|
2022 Estimation
|
|
Previous
estimation
|
|
ASMs compared with 2019 (b)
|
|
Down ~4.5%
|
|
Down ~4%
|
|
Economic fuel costs per
gallon1,5
|
|
$3.05 to $3.15
|
|
$2.95 to
$3.05
|
|
Fuel hedging premium expense per
gallon
|
|
$0.04
|
|
No change
|
|
Fuel hedging cash settlement gains per
gallon
|
|
$0.50
|
|
$0.51
|
|
CASM-X compared with
20193
|
|
Up 14% to 15%
|
|
Up 12% to
16%
|
|
Scheduled debt repayments
|
|
~$2.6 billion
|
|
~$820
million
|
|
Interest expense (millions)
|
|
~$340
|
|
~$360
|
|
Aircraft (c)
|
|
768
|
|
765
|
|
Effective tax rate
|
|
24% to 26%
|
|
No change
|
|
Capital spending (billions) (d)
|
|
~$4.0
|
|
No change
|
|
|
(a) The Company
believes that operating revenues compared with 2019 is a relevant
measure of performance due to the significant impacts in 2020 and
2021 from the pandemic.
|
(b) Available seat
miles (ASMs, or capacity). The Company's flight schedule is
currently published for sale through July 10, 2023. The Company's
fourth quarter 2022 guidance declined slightly from its previous
estimation of down one percent to two percent, compared with fourth
quarter 2019, primarily due to flight cancellations from the impact
of Hurricane Ian. The Company continues to expect first
quarter 2023 capacity to be up approximately 10 percent, compared
with first quarter 2022, and currently expects second quarter 2023
capacity to be up approximately 14 percent, compared with second
quarter 2022.
|
(c) Aircraft on
property, end of period. The Company ended third quarter 2022 with
742 Boeing 737 aircraft. During fourth quarter 2022, the Company
continues to expect 31 Boeing 737 MAX 8 (-8) aircraft deliveries.
The Company now expects to retire 26 Boeing 737-700 (-700) aircraft
in 2022, including 5 -700 retirements in fourth quarter 2022,
compared with its previous guidance of 29 -700 retirements this
year. As a result, the Company now expects to end the year with 768
aircraft, compared with its previous guidance of 765 aircraft. The
delivery schedule for the Boeing 737 MAX 7 (-7) is dependent on the
Federal Aviation Administration ("FAA") issuing required
certifications and approvals to Boeing and the Company. The FAA
will ultimately determine the timing of the -7 certification and
entry into service, and the Company therefore offers no assurances
that current estimations and timelines are correct. Furthermore,
given the current ongoing status of the -7 certification and pace
of expected deliveries for the remainder of this year, it is the
Company's assumption that it will receive no -7 aircraft deliveries
in 2022, and that the remaining 48 MAX aircraft reflected in its
2022 contractual order book will shift out of 2022.
|
(d) Represents the
Company's current expectation which assumes a total of 66 -8
aircraft deliveries in 2022. The Company continues to estimate $900
million in non-aircraft capital spending in 2022.
|
Revenue Results and Outlook:
- Record third quarter 2022 operating revenues of $6.2 billion, a 10.3 percent increase compared
with third quarter 2019—in line with the Company's previous
guidance
- Third quarter 2022 operating revenues per available seat mile
(RASM, or unit revenues) increased 10.6 percent driven primarily by
a passenger yield increase of 5.3 percent, coupled with a load
factor increase of 1.9 points, all compared with third quarter
2019
- Third quarter 2022 managed business revenues were down 28
percent compared with third quarter 2019—in line with the Company's
previous guidance
The Company's revenue performance in third quarter 2022 was
strong, despite a negative impact of approximately $18 million due to the flight disruptions caused
by Hurricane Ian in late September
2022. This negative impact in third quarter 2022 was more
than offset by improving leisure demand and close-in bookings in
September 2022. In addition, the Company's third quarter 2022
operating revenues benefited from its loyalty program, including
elevated point redemptions for flights and incremental revenue from
its co-brand credit card agreement, as well as increased Upgraded
Boarding take-rates following the new digital self-service launch
in August 2022.
As anticipated, the Company's third quarter 2022 operating
revenues included a two point sequential operating revenue growth
headwind from second quarter to third quarter 2022, compared with
their respective 2019 levels, due to the increase in short-haul
trips in business markets in an effort to support the reliability
of its operational performance and expected business travel demand.
While third quarter 2022 managed business revenues remained below
2019 levels, and softened in July and August compared with
June 2022, the Company experienced
sequential improvement from August to September, with September 2022 managed business revenues down 25
percent compared with September 2019
levels. Also, as anticipated, the Company's third quarter 2022
operating revenues included a five point sequential operating
revenue growth headwind from second quarter to third quarter 2022,
compared with their respective 2019 levels, due to a shift in the
timing of recognition of breakage revenue associated with the
Company's July 2022 policy change to
eliminate expiration dates on qualifying flight
credits6. The Company does not expect a material impact
on fourth quarter 2022 operating revenues from either the increase
in short-haul trips or its policy change to eliminate expiration
dates on qualifying flight credits.
Thus far, the Company continues to experience strong leisure and
business revenue trends and strong bookings in fourth quarter 2022,
including the holiday time periods, despite an estimated negative
impact caused by Hurricane Ian of approximately $10 million. Based on current trends, fourth
quarter 2022 operating revenues are expected to accelerate compared
with third quarter 2022, both nominally and compared with
their respective 2019 levels, and fourth quarter 2022 managed
business revenues are estimated to be down in the range of 20
percent to 25 percent, compared with fourth quarter 2019.
Fuel Costs and Outlook:
- Third quarter 2022 fuel costs were $3.34 per gallon1—in line with the
Company's previous guidance—and included $0.02 per gallon in premium expense and
$0.43 per gallon in favorable cash
settlements from fuel derivative contracts
- Third quarter 2022 fuel efficiency improved 1.5 percent
compared with third quarter 2019 due to more MAX aircraft, the
Company's most fuel-efficient aircraft, as a percentage of its
fleet
- As of October 19, 2022, the fair
market value of the Company's fuel derivative contracts settling in
fourth quarter 2022 through the end of 2024 was an asset of
$685 million
The Company's multi-year fuel hedging program continues to
provide insurance against spikes in energy prices and significantly
offset the market price increase in jet fuel in third quarter
2022. The Company's current fuel derivative contracts contain
a combination of instruments based in West Texas Intermediate,
Brent crude oil, and refined products, such as heating oil. The
economic fuel price per gallon
sensitivities5 provided in the table below assume
the relationship between Brent crude oil and refined products based
on market prices as of October 19, 2022.
|
|
Estimated economic fuel price per gallon,
including taxes and fuel hedging premiums
|
Average Brent Crude Oil
price per barrel
|
|
4Q 2022
|
$70
|
|
$2.65 -
$2.75
|
$80
|
|
$2.90 -
$3.00
|
Current Market (a)
|
|
$3.15 - $3.25
|
$100
|
|
$3.35 -
$3.45
|
$110
|
|
$3.60 -
$3.70
|
$120
|
|
$3.90 -
$4.00
|
|
|
|
Fair market value
|
|
$189 million
|
Estimated premium costs
|
|
$13 million
|
|
(a) Brent crude oil
average market price as of October 19, 2022, was $91 per
barrel for fourth quarter 2022.
|
In addition, the Company is providing its maximum percentage of
estimated fuel consumption7 covered by fuel
derivative contracts in the following table:
|
|
|
Period
|
|
|
|
|
|
|
Maximum fuel hedged percentage
(a)
|
|
|
|
2022
|
|
|
|
|
|
|
63 %
|
|
|
|
2023
|
|
|
|
|
|
|
50 %
|
|
|
|
2024
|
|
|
|
|
|
|
15 %
|
|
(a) Based on the
Company's current available seat mile plans. The Company is
currently 61 percent hedged for fourth quarter 2022.
|
Non-Fuel Costs and Outlook:
- Third quarter 2022 operating expenses of $5.8 billion increased 20.9 percent compared with
third quarter 2019
- Third quarter 2022 operating expenses, excluding fuel and oil
expense, special items, and profitsharing, increased 11.9 percent
compared with third quarter 2019
- Third quarter 2022 CASM-X increased 12.2 percent compared with
third quarter 2019—in line with the Company's previous
guidance
- The Company accrued $57 million
of profitsharing expense in third quarter 2022, bringing
year-to-date profitsharing expense to $175
million as of September 30,
2022
The Company's third quarter 2022 CASM-X increase, compared with
third quarter 2019, was primarily due to continued cost headwinds
from operating at suboptimal productivity levels, inflationary cost
pressures, and accruals for expected future contractual wage rate
increases. However, the Company's third quarter 2022 CASM-X
increase was on the lower end of its previous guidance range
primarily due to lower than anticipated healthcare and benefits
costs, as well as favorable airport settlements received during
third quarter 2022, which the Company previously expected to
receive in fourth quarter 2022.
The Company continues to experience inflationary cost pressures
in fourth quarter 2022, in particular with higher rates for labor,
benefits, and airports. Fourth quarter 2022 costs are also
pressured by the shifting of favorable airport settlements into
third quarter 2022, as well as increased cost headwinds due to
operating at suboptimal productivity levels. Headcount is expected
to increase further in fourth quarter 2022 to support plans for
network restoration in 2023, while capacity levels are expected to
decline seasonally in fourth quarter 2022 compared with third
quarter 2022, relative to their respective 2019 levels. The Company
remains on track with its goal this year to add more than 10,000
new Employees, net of attrition.
Third quarter 2022 net interest expense, which is included in
Other expenses, decreased $99
million, year-over-year, primarily due to a $68 million year-over-year increase in interest
income driven primarily by higher interest rates, coupled with a
$29 million year-over-year decrease
in interest expense primarily due to various debt repurchases
throughout 2022, as well as elimination of the debt discount as a
result of the Company's adoption of Accounting Standards Update
(ASU) No. 2020-06, Debt—Debt with Conversion and Other Options
(Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's
Own Equity (Subtopic 815-40): Accounting for Convertible
Instruments and Contracts in an Entity's Own Equity.
Fleet and Capital Spending:
The Company received 23 -8 aircraft during third quarter 2022,
as expected, for a year-to-date total of 35 -8 aircraft deliveries
received as of September 30, 2022.
The Company ended third quarter 2022 with 742 aircraft,
which reflects 11 -700 aircraft retirements during the quarter.
While the Company remains contractually scheduled to receive 114
MAX deliveries this year, the Company continues to expect a portion
of its deliveries to shift out of 2022 due to Boeing's supply chain
challenges and the current status of the -7 certification. Based on
continued discussions with Boeing regarding the pace of expected
deliveries for the remainder of this year, the Company continues to
estimate it will receive a total of 66 -8 aircraft deliveries in
2022, including 31 -8 deliveries in fourth quarter 2022, and no -7
deliveries in 2022. The Company now expects to retire 26 -700
aircraft in 2022, including 5 -700 retirements in fourth quarter
2022, compared with its previous guidance of 29 -700
retirements. As a result, the Company now expects to end the
year with 768 aircraft, compared with its previous guidance of 765
aircraft.
The Company's third quarter 2022 capital expenditures were
$1.1 billion driven primarily by
aircraft-related capital spending, as well as technology,
facilities, and operational investments. The Company continues to
estimate its 2022 capital spending to be approximately $4.0 billion, which assumes a total of 66 -8
aircraft deliveries in 2022. The Company's 2022 capital spending
guidance continues to include approximately $900 million in non-aircraft capital
spending.
Since the Company's previous disclosure on July 28, 2022, the Company exercised the
remaining five -8 options for delivery in 2022 and exercised the
remaining four -7 options for delivery in 2023. Additionally in
October 2022, the Company converted
17 2023 -7 firm orders to -8 firm orders; exercised three -7
options for delivery in 2024; accelerated 15 -7 firm orders from
2030 into 2026; and accelerated 10 -8 firm orders from 2031 into
2030. The following tables provide further information regarding
the Company's contractual order book and compare its contractual
order book as of October 27, 2022,
with its previous order book as of July 28,
2022. Given current supply chain and aircraft delivery
delays, the Company will continue working with Boeing to solidify
future delivery dates.
Current 737
Contractual Order Book as of October 27, 2022:
|
|
The Boeing Company
|
|
|
|
-7 Firm Orders
|
|
-8 Firm Orders
|
|
-7 or -8 Options
|
|
Total
|
|
2022
|
14
|
|
100
|
|
|
—
|
|
114
|
|
(c)
|
2023
|
25
|
|
65
|
|
|
—
|
|
90
|
|
|
2024
|
33
|
|
—
|
|
|
53
|
|
86
|
|
|
2025
|
30
|
|
—
|
|
|
56
|
|
86
|
|
|
2026
|
30
|
|
15
|
|
|
40
|
|
85
|
|
|
2027
|
15
|
|
15
|
|
|
6
|
|
36
|
|
|
2028
|
15
|
|
15
|
|
|
—
|
|
30
|
|
|
2029
|
20
|
|
30
|
|
|
—
|
|
50
|
|
|
2030
|
—
|
|
55
|
|
|
—
|
|
55
|
|
|
2031
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
|
182
|
(a)
|
295
|
|
(b)
|
155
|
|
632
|
|
|
|
(a) The delivery timing
for the -7 is dependent on the FAA issuing required certifications
and approvals to Boeing and the Company. The FAA will ultimately
determine the timing of the -7 certification and entry into
service, and the Company therefore offers no assurances that
current estimations and timelines are correct.
|
(b) The Company has
flexibility to designate firm orders or options as -7s or -8s, upon
written advance notification as stated in the contract.
|
(c) Includes 35 -8
deliveries received through September 30, 2022 and 31 expected -8
deliveries in fourth quarter 2022, for a total of 66 -8 deliveries
in 2022. Thus far, the Company has received a total of 40 -8
deliveries in 2022. While the Company is contractually scheduled to
receive 114 MAX deliveries, including options, this year, a portion
of its deliveries are expected to shift out of 2022 due to Boeing's
supply chain challenges and the current status of the -7
certification. Furthermore, given the current ongoing status of the
-7 certification and pace of expected deliveries for the remainder
of this year, it is the Company's assumption that it will receive
no -7 aircraft deliveries in 2022, and has the ability to convert
-7s to -8s as noted in footnote (b).
|
Previous 737
Contractual Order Book as of July 28, 2022
(a):
|
|
|
The Boeing Company
|
|
|
|
-7 Firm Orders
|
|
-8 Firm Orders
|
|
-7 or -8 Options
|
|
Total
|
|
2022
|
14
|
|
95
|
|
5
|
|
114
|
|
|
2023
|
38
|
|
48
|
|
4
|
|
90
|
|
|
2024
|
30
|
|
—
|
|
56
|
|
86
|
|
|
2025
|
30
|
|
—
|
|
56
|
|
86
|
|
|
2026
|
15
|
|
15
|
|
40
|
|
70
|
|
|
2027
|
15
|
|
15
|
|
6
|
|
36
|
|
|
2028
|
15
|
|
15
|
|
—
|
|
30
|
|
|
2029
|
20
|
|
30
|
|
—
|
|
50
|
|
|
2030
|
15
|
|
45
|
|
—
|
|
60
|
|
|
2031
|
—
|
|
10
|
|
—
|
|
10
|
|
|
|
192
|
|
273
|
|
167
|
|
632
|
|
|
|
(a) The 'Previous 737
Contractual Order Book' is for reference and comparative purposes
only. It should no longer be relied upon. See 'Current 737
Contractual Order Book' for the Company's current aircraft order
book.
|
Liquidity and Capital Deployment:
- The Company ended third quarter 2022 with $13.7 billion in cash and short-term investments
and a fully available revolving credit line of $1.0 billion
- The Company had a net cash position8 of $5.0 billion, and adjusted debt9 to
invested capital (leverage) of 48 percent as of September 30, 2022
- The Company paid $1.9 billion
during third quarter 2022 to retire debt and finance lease
obligations, including the redemption of the outstanding
$1.2 billion principal amount of all
of its outstanding 4.750% Notes due 2023; the extinguishment of
$184 million in principal of the
Company's convertible notes for a cash payment of $239 million; the extinguishment of $373 million in principal of various other
unsecured notes for a cash payment of $383
million; and $54 million in
scheduled debt payments
- The Company's 2022 total debt repayments is expected to be
$2.6 billion, compared with its
previous guidance of $820 million,
due to the unscheduled extinguishments noted above
Awards and Recognitions:
- #1 Marketing Carrier in Customer Satisfaction per the U.S.
Department of Transportation10
- Ranked #1 for Newsweek's America's Best Customer Service 2023
in the Low-Cost Airlines category
- Ranked #2 in the Best Airlines for 2022 list by The Points
Guy
- Named to the Best Employers for Diversity 2022 list by
Forbes
- Named a Best Place to Work for Disability Inclusion after
achieving a top score on Disability:IN's 2022 Disability Equality
Index
- Awarded the Heritage Award by the Texas Travel Alliance
Environmental, Social, and Governance (ESG):
- Brought sustainable aviation fuel (SAF) to Oakland International Airport (OAK) in August
2022—the first airline to bring SAF to OAK
- Reached agreement with 4AIR to offer corporate Customers
participating in the Company's SAF Beta Program with independently
verified assurance for the Scope 3 emission reduction rights
associated with their support of expanding SAF in the Company's
operations
- Purchased offsets equivalent to the carbon emissions generated
by the Company's Employee business11 and
charitable12 travel for 202113
- Welcomed Angelo State University
(ASU) as a University partner in Destination 225º, the Company's
First Officer development and recruitment program. The
Hispanic-Serving Institution in San
Angelo, Texas, is the sixth University partner in the
program that provides a pathway for qualified aviators to join the
Company as Pilots
- Celebrated the contributions and influence of Hispanic
Americans in recognition of Hispanic Heritage Month throughout
September 2022
- Launched a SAF website page describing the Company's SAF
efforts, including its SAF Policy
- Launched a Partners website page dedicated to highlighting key
organizations the Company is partnering with to advance
environmental sustainability
- Visit southwest.com/citizenship for details about the Company's
ongoing ESG efforts
Third Quarter 2022 Supplemental Financial
Results
|
(unaudited)
|
The Company believes
certain 2022 measures compared with 2019 are also relevant due to
the significant impacts in 2020 and 2021 from the pandemic.
Therefore, the below supplemental information is provided for
reference.
|
|
|
|
|
|
|
|
|
|
As reported
|
|
|
|
|
|
|
|
|
|
|
Three months ended September
30,
|
|
|
|
Nine months ended September 30,
|
|
|
(in millions, except per share and unit
costs)
|
|
2022
|
|
2019
|
|
Percent
Change
|
|
2022
|
|
2019
|
|
Percent
Change
|
Net income
|
|
$
|
277
|
|
|
$
|
659
|
|
|
(58.0)
|
|
$
|
759
|
|
|
$
|
1,787
|
|
|
(57.5)
|
Net income per share,
diluted
|
|
$
|
0.44
|
|
|
$
|
1.23
|
|
|
(64.2)
|
|
$
|
1.21
|
|
|
$
|
3.29
|
|
|
(63.2)
|
Operating
revenues
|
|
$
|
6,220
|
|
|
$
|
5,639
|
|
|
10.3
|
|
$
|
17,642
|
|
|
$
|
16,698
|
|
|
5.7
|
Operating
expenses
|
|
$
|
5,825
|
|
|
$
|
4,820
|
|
|
20.9
|
|
$
|
16,240
|
|
|
$
|
14,406
|
|
|
12.7
|
Operating expenses,
excluding Fuel and oil expense
|
|
$
|
4,075
|
|
|
$
|
3,730
|
|
|
9.2
|
|
$
|
11,850
|
|
|
$
|
11,164
|
|
|
6.1
|
Operating expenses,
excluding Fuel and oil expense and profitsharing
|
|
$
|
4,018
|
|
|
$
|
3,586
|
|
|
12.0
|
|
$
|
11,675
|
|
|
$
|
10,761
|
|
|
8.5
|
RASM (cents)
|
|
15.84
|
|
|
14.32
|
|
|
10.6
|
|
15.90
|
|
|
14.24
|
|
|
11.7
|
Passenger revenue yield
per RPM (cents)
|
|
16.74
|
|
|
15.90
|
|
|
5.3
|
|
17.15
|
|
|
15.76
|
|
|
8.8
|
CASM (cents)
|
|
14.83
|
|
|
12.24
|
|
|
21.2
|
|
14.63
|
|
|
12.29
|
|
|
19.0
|
CASM, excluding Fuel
and oil expense and profitsharing (cents)
|
|
10.23
|
|
|
9.11
|
|
|
12.3
|
|
10.52
|
|
|
9.18
|
|
|
14.6
|
Fuel costs per gallon,
including fuel tax
|
|
$
|
3.39
|
|
|
$
|
2.07
|
|
|
63.8
|
|
$
|
3.05
|
|
|
$
|
2.09
|
|
|
45.9
|
Revenue passengers
carried (000s)
|
|
34,434
|
|
|
33,538
|
|
|
2.7
|
|
93,688
|
|
|
99,758
|
|
|
(6.1)
|
Available seat miles
(ASMs)
|
|
39,272
|
|
|
39,379
|
|
|
(0.3)
|
|
110,978
|
|
|
117,250
|
|
|
(5.3)
|
Load factor
|
|
85.4
|
%
|
|
83.5
|
%
|
|
1.9 pts.
|
|
83.4
|
%
|
|
83.7
|
%
|
|
(0.3) pts.
|
Active fulltime
equivalent Employees
|
|
64,123
|
|
|
60,590
|
|
|
5.8
|
|
64,123
|
|
|
60,590
|
|
|
5.8
|
|
|
|
|
|
|
|
|
|
Adjusted for special items
|
|
|
|
|
|
|
|
|
|
|
Three months ended September
30,
|
|
|
|
Nine months ended September 30,
|
|
|
(in millions, except per share and unit
costs)
|
|
2022
|
|
2019
|
|
Percent
Change
|
|
2022
|
|
2019
|
|
Percent
Change
|
Net income
|
|
$
|
316
|
|
|
$
|
659
|
|
|
(52.0)
|
|
$
|
950
|
|
|
$
|
1,787
|
|
|
(46.8)
|
Net income per share,
diluted
|
|
$
|
0.50
|
|
|
$
|
1.23
|
|
|
(59.3)
|
|
$
|
1.51
|
|
|
$
|
3.29
|
|
|
(54.1)
|
Operating
revenues
|
|
$
|
6,220
|
|
|
$
|
5,639
|
|
|
10.3
|
|
$
|
17,642
|
|
|
$
|
16,698
|
|
|
5.7
|
Operating
expenses
|
|
$
|
5,795
|
|
|
$
|
4,820
|
|
|
20.2
|
|
$
|
16,179
|
|
|
$
|
14,406
|
|
|
12.3
|
Operating expenses,
excluding Fuel and oil expense
|
|
$
|
4,071
|
|
|
$
|
3,730
|
|
|
9.1
|
|
$
|
11,815
|
|
|
$
|
11,164
|
|
|
5.8
|
Operating expenses,
excluding Fuel and oil expense and profitsharing
|
|
$
|
4,014
|
|
|
$
|
3,586
|
|
|
11.9
|
|
$
|
11,640
|
|
|
$
|
10,761
|
|
|
8.2
|
RASM (cents)
|
|
15.84
|
|
|
14.32
|
|
|
10.6
|
|
15.90
|
|
|
14.24
|
|
|
11.7
|
Passenger revenue yield
per RPM (cents)
|
|
16.74
|
|
|
15.90
|
|
|
5.3
|
|
17.15
|
|
|
15.76
|
|
|
8.8
|
CASM (cents)
|
|
14.76
|
|
|
12.24
|
|
|
20.6
|
|
14.58
|
|
|
12.29
|
|
|
18.6
|
CASM, excluding Fuel
and oil expense and profitsharing (cents)
|
|
10.22
|
|
|
9.11
|
|
|
12.2
|
|
10.49
|
|
|
9.18
|
|
|
14.3
|
Fuel costs per gallon,
including fuel tax (economic)
|
|
$
|
3.34
|
|
|
$
|
2.07
|
|
|
61.4
|
|
$
|
3.03
|
|
|
$
|
2.09
|
|
|
45.0
|
Revenue passengers
carried (000s)
|
|
34,434
|
|
|
33,538
|
|
|
2.7
|
|
93,688
|
|
|
99,758
|
|
|
(6.1)
|
Available seat miles
(ASMs)
|
|
39,272
|
|
|
39,379
|
|
|
(0.3)
|
|
110,978
|
|
|
117,250
|
|
|
(5.3)
|
Load factor
|
|
85.4
|
%
|
|
83.5
|
%
|
|
1.9 pts.
|
|
83.4
|
%
|
|
83.7
|
%
|
|
(0.3) pts.
|
Active fulltime
equivalent Employees
|
|
64,123
|
|
|
60,590
|
|
|
5.8
|
|
64,123
|
|
|
60,590
|
|
|
5.8
|
Conference Call:
The Company will discuss its third quarter 2022 results on a
conference call at 12:30 p.m. Eastern
Time today. To listen to a live broadcast of the conference
call, please go
to https://www.southwestairlinesinvestorrelations.com.
Footnotes
1See Note
Regarding Use of Non-GAAP Financial Measures for additional
information on special items. In addition, information regarding
special items and economic results is included in the accompanying
table Reconciliation of Reported Amounts to Non-GAAP Items (also
referred to as "excluding special items").
|
2Includes
$13.7 billion in cash and short-term investments and a fully
available revolving credit line of $1.0 billion.
|
3Projections
do not reflect the potential impact of fuel and oil expense,
special items, and profitsharing because the Company cannot
reliably predict or estimate those items or expenses or their
impact to its financial statements in future periods, especially
considering the significant volatility of the fuel and oil expense
line item. Accordingly, the Company believes a reconciliation of
non-GAAP financial measures to the equivalent GAAP financial
measures for these projected results is not meaningful or available
without unreasonable effort.
|
4Projections
do not reflect the potential impact of special items because the
Company cannot reliably predict or estimate those items or their
impact to its financial statements in future periods. Accordingly,
the Company believes a reconciliation of non-GAAP financial
measures to the equivalent GAAP financial measures for these
projected results is not meaningful or available without
unreasonable effort.
|
5Based on
the Company's existing fuel derivative contracts and market prices
as of October 19, 2022, fourth quarter and full year 2022 economic
fuel costs per gallon are estimated to be in the range of $3.15 to
$3.25 and $3.05 to $3.15, respectively, compared with the Company's
previous estimations in the range of $3.00 to $3.10 and $2.95 to
$3.05, respectively. Economic fuel cost projections do not reflect
the potential impact of special items because the Company cannot
reliably predict or estimate the hedge accounting impact associated
with the volatility of the energy markets, the impact of COVID-19
cases on air travel demand, or the impact to its financial
statements in future periods. Accordingly, the Company believes a
reconciliation of non-GAAP financial measures to the equivalent
GAAP financial measures for projected results is not meaningful or
available without unreasonable effort. See Note Regarding Use of
Non-GAAP Financial Measures.
|
6Flight
credits result from canceling reservations and previously were
valid for no longer than one year from the date of original
purchase. Flight credits for non-refundable fares are issued as
long as the reservation is cancelled more than 10 minutes prior to
the scheduled departure. Flight credits or refunds for refundable
fares are issued regardless of cancellation time. Under the policy
change, flight credits unexpired on, or created on or after July
28, 2022 do not expire and will show an expiration date
(12/31/2040) until the Company's systems are updated. A flight
credit with an expiration date on or before July 27, 2022, has
expired in accordance with its existing expiration date.
|
7The
Company's maximum fuel hedged percentage is calculated using the
maximum number of gallons that are covered by derivative contracts
divided by the Company's estimate of total fuel gallons to be
consumed for each respective period. The Company's maximum number
of gallons that are covered by derivative contracts may be at
different strike prices and at strike prices materially higher than
the current market prices. The volume of gallons covered by
derivative contracts that ultimately get exercised in any given
period may vary significantly from the volumes used to calculate
the Company's maximum fuel hedged percentages, as market prices and
the Company's fuel consumption fluctuate.
|
8Net cash
position is calculated as the sum of cash and cash equivalents and
short-term investments, less the sum of short-term and long-term
debt.
|
9Adjusted
debt is calculated as short-term and long-term debt including the
net present value of aircraft rentals related to operating
leases.
|
10The
Department of Transportation (DOT) ranks all U.S. carriers based on
the lowest ratio of complaints per 100,000 passengers enplaned, as
published in the DOT Air Travel Consumer Report (ATCR). Southwest
earned the best Customer Satisfaction ranking among U.S. Marketing
Carriers for January through August 2022, the most recent time
period published in the ATCR, and has held the best U.S. Marketing
Carrier ranking for 28 of the past 32 years. A Marketing Carrier is
an airline that advertises under a common brand name, sells
reservations, manages frequent flyer programs, and is ultimately
responsible for the airline's consumer policies. Operating Carriers
only handle the flight operations, passenger check-in/boarding, and
baggage handling for the respective Marketing Carriers they
serve—Operating Carriers are not responsible for DOT complaints
related to policies, procedures, and advertising associated with
the Marketing Carrier's brand.
|
11Company
Non-Revenue Must Ride (NRMR) flights, inclusive of all Frontline
and Headquarters Employees' work-related travel, including
deadheading Employees. This excludes flights flown on other
airlines.
|
12E-passes
donated to national and local charitable partners and
programs.
|
13The funds
used to purchase the 2021 offsets came from the Southwest Airlines
Foundation, a corporate advised fund facilitated by Silicon Valley
Community Foundation. The 2021 offsets were purchased through a
donation to Carbonfund, a non-profit that provides carbon
offsetting and greenhouse gas reduction options to individuals,
businesses, and organizations.
|
Cautionary Statement Regarding Forward-Looking
Statements
This news release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
Specific forward-looking statements include, without limitation,
statements related to (i) the Company's financial and operational
outlook, expectations, goals, plans, and projected results of
operations, including factors and assumptions underlying the
Company's expectations and projections; (ii) the Company's
plans and expectations with respect to capacity and capacity
adjustments, including factors and assumptions underlying the
Company's expectations and projections; (iii) the Company's
network plans and expectations, including with respect to
associated operational benefits, adding flights, future growth,
short-haul trips, and restoring its network; (iv) the
Company's priorities and focus areas, including with respect to the
Company's labor contracts, operational reliability, optimizing
staffing, and hiring plans and expectations; (v) the Company's
plans, expectations, and goals regarding its fleet and fleet
delivery schedule, including fleet utilization and factors and
assumptions underlying the Company's plans and expectations;
(vi) the Company's expectations with respect to fuel costs,
hedging gains, and fuel efficiency, and the Company's related
management of risks associated with changing jet fuel prices,
including factors underlying the Company's expectations;
(vii) the Company's plans, estimates, and assumptions related
to repayment of debt obligations, interest expense, effective tax
rate, and capital spending, including factors and assumptions
underlying the Company's expectations and projections; (viii) the
Company's expectations with respect to its Flight credits policy
change, including the expected impacts from the policy change; and
(ix) the Company's expectations regarding passenger demand, revenue
trends, and bookings, including with respect to managed business
revenues. These forward-looking statements are based on the
Company's current estimates, intentions, beliefs, expectations,
goals, strategies, and projections for the future and are not
guarantees of future performance. Forward-looking statements
involve risks, uncertainties, assumptions, and other factors that
are difficult to predict and that could cause actual results to
vary materially from those expressed in or indicated by them.
Factors include, among others, (i) the impact of fears or
actual outbreaks of diseases, extreme or severe weather and
natural disasters, actions of competitors (including, without
limitation, pricing, scheduling, capacity, and network decisions,
and consolidation and alliance activities), consumer perception,
economic conditions, fears of terrorism or war, socio-demographic
trends, and other factors beyond the Company's control, on consumer
behavior and the Company's results of operations and business
decisions, plans, strategies, and results; (ii) the Company's
dependence on its workforce, including its ability to employ
sufficient numbers of qualified Employees to effectively and
efficiently maintain its operations; (iii) any negative
developments related to the COVID-19 pandemic, including, for
example, with respect to the duration, spread, severity, or any
recurrence of the COVID-19 pandemic or any new variant strains of
the underlying virus; the effectiveness, availability, and usage of
COVID-19 vaccines; the impact of government mandates, directives,
orders, regulations, and other governmental actions related to
COVID-19 on the Company's business plans and its ability to retain
key Employees; the extent of the impact of COVID-19 on overall
demand for air travel and the Company's related business plans and
decisions; and the impact of the COVID-19 pandemic on the Company's
access to capital; (iv) the Company's dependence on Boeing
with respect to the Company's fleet plans, deliveries, operations,
strategies, and goals; (v) the impact of fuel price changes, fuel
price volatility, volatility of commodities used by the Company for
hedging jet fuel, and any changes to the Company's fuel hedging
strategies and positions, on the Company's business plans and
results of operations; (vi) the Company's ability to timely and
effectively implement, transition, and maintain the necessary
information technology systems and infrastructure to support its
operations and initiatives; (vii) the impact of governmental
regulations and other governmental actions on the Company's
business plans and operations; (viii) the Company's
dependence on Boeing and the Federal Aviation Administration with
respect to the certification of the Boeing MAX 7 aircraft;
(ix) the Company's dependence on other third parties, in
particular with respect to its fuel supply and Global Distribution
Systems, and the impact on the Company's operations and results of
operations of any third party delays or non-performance; (x) the
impact of labor matters on the Company's business decisions, plans,
and strategies; and (xi) other factors, as described in the
Company's filings with the Securities and Exchange Commission,
including the detailed factors discussed under the heading "Risk
Factors" in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2021, and in
the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 2022.
Southwest Airlines
Co.
Condensed
Consolidated Statement of Income
(in millions, except
per share amounts)
(unaudited)
|
|
|
Three months ended
|
|
|
|
Nine months ended
|
|
|
|
|
September 30,
|
|
|
|
September 30,
|
|
|
|
|
2022
|
|
2021
|
|
Percent
Change
|
|
2022
|
|
2021
|
|
Percent
Change
|
OPERATING REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passenger
|
|
$
|
5,613
|
|
$
|
4,227
|
|
32.8
|
|
$
|
15,867
|
|
$
|
9,508
|
|
66.9
|
Freight
|
|
44
|
|
47
|
|
(6.4)
|
|
133
|
|
140
|
|
(5.0)
|
Other
|
|
563
|
|
405
|
|
39.0
|
|
1,642
|
|
1,091
|
|
50.5
|
Total operating revenues
|
|
6,220
|
|
4,679
|
|
32.9
|
|
17,642
|
|
10,739
|
|
64.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES, NET:
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries, wages, and
benefits
|
|
2,322
|
|
2,122
|
|
9.4
|
|
6,771
|
|
5,518
|
|
22.7
|
Payroll support and
voluntary Employee programs, net
|
|
—
|
|
(776)
|
|
n.m.
|
|
—
|
|
(2,963)
|
|
n.m.
|
Fuel and oil
|
|
1,750
|
|
990
|
|
76.8
|
|
4,390
|
|
2,261
|
|
94.2
|
Maintenance materials
and repairs
|
|
204
|
|
250
|
|
(18.4)
|
|
624
|
|
646
|
|
(3.4)
|
Landing fees and
airport rentals
|
|
395
|
|
376
|
|
5.1
|
|
1,128
|
|
1,092
|
|
3.3
|
Depreciation and
amortization
|
|
335
|
|
322
|
|
4.0
|
|
984
|
|
949
|
|
3.7
|
Other operating
expenses
|
|
819
|
|
662
|
|
23.7
|
|
2,343
|
|
1,710
|
|
37.0
|
Total operating expenses, net
|
|
5,825
|
|
3,946
|
|
47.6
|
|
16,240
|
|
9,213
|
|
76.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME
|
|
395
|
|
733
|
|
(46.1)
|
|
1,402
|
|
1,526
|
|
(8.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER EXPENSES (INCOME):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
86
|
|
115
|
|
(25.2)
|
|
272
|
|
343
|
|
(20.7)
|
Capitalized
interest
|
|
(11)
|
|
(9)
|
|
22.2
|
|
(31)
|
|
(27)
|
|
14.8
|
Interest
income
|
|
(70)
|
|
(2)
|
|
n.m.
|
|
(101)
|
|
(6)
|
|
n.m.
|
Loss on extinguishment
of debt
|
|
76
|
|
12
|
|
n.m.
|
|
192
|
|
12
|
|
n.m.
|
Other (gains) losses,
net
|
|
(39)
|
|
17
|
|
n.m.
|
|
57
|
|
(44)
|
|
n.m.
|
Total other expenses (income)
|
|
42
|
|
133
|
|
(68.4)
|
|
389
|
|
278
|
|
39.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES
|
|
353
|
|
600
|
|
(41.2)
|
|
1,013
|
|
1,248
|
|
(18.8)
|
PROVISION FOR INCOME TAXES
|
|
76
|
|
154
|
|
(50.6)
|
|
254
|
|
339
|
|
(25.1)
|
NET INCOME
|
|
$
|
277
|
|
$
|
446
|
|
(37.9)
|
|
$
|
759
|
|
$
|
909
|
|
(16.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME PER SHARE:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.47
|
|
$
|
0.75
|
|
(37.8)
|
|
$
|
1.28
|
|
$
|
1.54
|
|
(16.9)
|
Diluted
|
|
$
|
0.44
|
|
$
|
0.73
|
|
(39.4)
|
|
$
|
1.21
|
|
$
|
1.49
|
|
(18.9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES
OUTSTANDING:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
593
|
|
592
|
|
0.2
|
|
593
|
|
591
|
|
0.3
|
Diluted
|
|
639
|
|
607
|
|
5.3
|
|
643
|
|
610
|
|
5.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Southwest Airlines
Co.
Reconciliation of
Reported Amounts to Non-GAAP Items (excluding special
items)
(See Note Regarding
Use of Non-GAAP Financial Measures)
(in millions, except
per share amounts)(unaudited)
|
|
|
Three months
ended
|
|
|
|
Nine months
ended
|
|
|
|
|
September
30,
|
|
Percent
|
|
September
30,
|
|
Percent
|
|
|
2022
|
|
2021
|
|
Change
|
|
2022
|
|
2021
|
|
Change
|
Fuel and oil expense, unhedged
|
|
$
|
1,931
|
|
$
|
999
|
|
|
|
$
|
5,079
|
|
$
|
2,264
|
|
|
Add: Premium cost of
fuel contracts designated as hedges
|
|
26
|
|
14
|
|
|
|
79
|
|
43
|
|
|
Deduct: Fuel hedge
gains included in Fuel and oil expense, net
|
|
(207)
|
|
(23)
|
|
|
|
(768)
|
|
(46)
|
|
|
Fuel and oil expense, as
reported
|
|
$
|
1,750
|
|
$
|
990
|
|
|
|
$
|
4,390
|
|
$
|
2,261
|
|
|
Add (Deduct): Fuel
hedge contracts settling in the current period, but for which
losses (gains) were reclassified from AOCI
|
|
(12)
|
|
5
|
|
|
|
(12)
|
|
19
|
|
|
Add (Deduct): Premium
cost of fuel contracts not designated as hedges
|
|
(14)
|
|
11
|
|
|
|
(14)
|
|
32
|
|
|
Fuel and oil expense, excluding special items
(economic)
|
|
$
|
1,724
|
|
$
|
1,006
|
|
71.4
|
|
$
|
4,364
|
|
$
|
2,312
|
|
88.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses, net, as
reported
|
|
$
|
5,825
|
|
$
|
3,946
|
|
|
|
$
|
16,240
|
|
$
|
9,213
|
|
|
Add: Payroll support
and voluntary Employee programs, net
|
|
—
|
|
776
|
|
|
|
—
|
|
2,963
|
|
|
Add (Deduct): Fuel
hedge contracts settling in the current period, but for which
losses (gains) were reclassified from AOCI
|
|
(12)
|
|
5
|
|
|
|
(12)
|
|
19
|
|
|
Add: Interest rate swap
agreements terminated in a prior period, but for which losses were
reclassified from AOCI
|
|
—
|
|
—
|
|
|
|
—
|
|
2
|
|
|
Add (Deduct): Premium
cost of fuel contracts not designated as hedges
|
|
(14)
|
|
11
|
|
|
|
(14)
|
|
32
|
|
|
Deduct: Impairment of
long-lived assets
|
|
(4)
|
|
—
|
|
|
|
(35)
|
|
—
|
|
|
Total operating expenses, excluding special
items
|
|
$
|
5,795
|
|
$
|
4,738
|
|
22.3
|
|
$
|
16,179
|
|
$
|
12,229
|
|
32.3
|
Deduct: Fuel and oil
expense, excluding special items (economic)
|
|
(1,724)
|
|
(1,006)
|
|
|
|
(4,364)
|
|
(2,312)
|
|
|
Operating expenses, excluding Fuel and oil expense
and special items
|
|
$
|
4,071
|
|
$
|
3,732
|
|
9.1
|
|
$
|
11,815
|
|
$
|
9,917
|
|
19.1
|
Deduct: Profitsharing
expense
|
|
(57)
|
|
(77)
|
|
|
|
(175)
|
|
(186)
|
|
|
Operating expenses, excluding Fuel and oil expense,
special items, and profitsharing
|
|
$
|
4,014
|
|
$
|
3,655
|
|
9.8
|
|
$
|
11,640
|
|
$
|
9,731
|
|
19.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income, as reported
|
|
$
|
395
|
|
$
|
733
|
|
|
|
$
|
1,402
|
|
$
|
1,526
|
|
|
Deduct: Payroll support
and voluntary Employee programs, net
|
|
—
|
|
(776)
|
|
|
|
—
|
|
(2,963)
|
|
|
Add (Deduct): Fuel
hedge contracts settling in the current period, but for which
losses (gains) were reclassified from AOCI
|
|
12
|
|
(5)
|
|
|
|
12
|
|
(19)
|
|
|
Deduct: Interest rate
swap agreements terminated in a prior period, but for which losses
were reclassified from AOCI
|
|
—
|
|
—
|
|
|
|
—
|
|
(2)
|
|
|
Add (Deduct): Premium
cost of fuel contracts not designated as hedges
|
|
14
|
|
(11)
|
|
|
|
14
|
|
(32)
|
|
|
Add: Impairment of
long-lived assets
|
|
4
|
|
—
|
|
|
|
35
|
|
—
|
|
|
Operating income (loss), excluding special
items
|
|
$
|
425
|
|
$
|
(59)
|
|
n.m.
|
|
$
|
1,463
|
|
$
|
(1,490)
|
|
n.m.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (gains) losses, net, as
reported
|
|
$
|
(39)
|
|
$
|
17
|
|
|
|
$
|
57
|
|
$
|
(44)
|
|
|
Add (Deduct):
Mark-to-market impact from fuel contracts settling in current and
future periods
|
|
38
|
|
(3)
|
|
|
|
23
|
|
6
|
|
|
Add (Deduct): Premium
cost of fuel contracts not designated as hedges
|
|
14
|
|
(11)
|
|
|
|
14
|
|
(32)
|
|
|
Deduct: Unrealized
mark-to-market adjustment on available for sale
securities
|
|
—
|
|
—
|
|
|
|
(7)
|
|
—
|
|
|
Other (gains) losses, net, excluding special
items
|
|
$
|
13
|
|
$
|
3
|
|
n.m.
|
|
$
|
87
|
|
$
|
(70)
|
|
n.m.
|
|
|
|
|
|
Income before income taxes, as
reported
|
|
$
|
353
|
|
$
|
600
|
|
|
|
$
|
1,013
|
|
$
|
1,248
|
|
|
Deduct: Payroll support
and voluntary Employee programs, net
|
|
—
|
|
(776)
|
|
|
|
—
|
|
(2,963)
|
|
|
Add (Deduct): Fuel
hedge contracts settling in the current period, but for which
losses (gains) were reclassified from AOCI
|
|
12
|
|
(5)
|
|
|
|
12
|
|
(19)
|
|
|
Deduct: Interest rate
swap agreements terminated in a prior period, but for which losses
were reclassified from AOCI
|
|
—
|
|
—
|
|
|
|
—
|
|
(2)
|
|
|
Add (Deduct):
Mark-to-market impact from fuel contracts settling in current and
future periods
|
|
(38)
|
|
3
|
|
|
|
(23)
|
|
(6)
|
|
|
Add: Impairment of
long-lived assets
|
|
4
|
|
—
|
|
|
|
35
|
|
—
|
|
|
Add: Unrealized
mark-to-market adjustment on available for sale
securities
|
|
—
|
|
—
|
|
|
|
7
|
|
—
|
|
|
Add: Loss on
extinguishment of debt
|
|
76
|
|
12
|
|
|
|
192
|
|
12
|
|
|
Income (loss) before income taxes, excluding special
items
|
|
$
|
407
|
|
$
|
(166)
|
|
n.m.
|
|
$
|
1,236
|
|
$
|
(1,730)
|
|
n.m.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes, as
reported
|
|
$
|
76
|
|
$
|
154
|
|
|
|
$
|
254
|
|
$
|
339
|
|
|
Add (Deduct): Net
income (loss) tax impact of fuel and special items (a)
|
|
15
|
|
(185)
|
|
|
|
32
|
|
(713)
|
|
|
Provision (benefit) for income taxes, net, excluding
special items
|
|
$
|
91
|
|
$
|
(31)
|
|
n.m.
|
|
$
|
286
|
|
$
|
(374)
|
|
n.m.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income, as reported
|
|
$
|
277
|
|
$
|
446
|
|
|
|
$
|
759
|
|
$
|
909
|
|
|
Deduct: Payroll support
and voluntary Employee programs, net
|
|
—
|
|
(776)
|
|
|
|
—
|
|
(2,963)
|
|
|
Add (Deduct): Fuel
hedge contracts settling in the current period, but for which
losses (gains) were reclassified from AOCI
|
|
12
|
|
(5)
|
|
|
|
12
|
|
(19)
|
|
|
Deduct: Interest rate
swap agreements terminated in a prior period, but for which losses
were reclassified from AOCI
|
|
—
|
|
—
|
|
|
|
—
|
|
(2)
|
|
|
Add (Deduct):
Mark-to-market impact from fuel contracts settling in current and
future periods
|
|
(38)
|
|
3
|
|
|
|
(23)
|
|
(6)
|
|
|
Add: Impairment of
long-lived assets
|
|
4
|
|
—
|
|
|
|
35
|
|
—
|
|
|
Add: Unrealized
mark-to-market adjustment on available for sale
securities
|
|
—
|
|
—
|
|
|
|
7
|
|
—
|
|
|
Add: Loss on
extinguishment of debt
|
|
76
|
|
12
|
|
|
|
192
|
|
12
|
|
|
Add (Deduct): Net
income (loss) tax impact of special items (a)
|
|
(15)
|
|
185
|
|
|
|
(32)
|
|
713
|
|
|
Net income (loss), excluding special
items
|
|
$
|
316
|
|
$
|
(135)
|
|
n.m.
|
|
$
|
950
|
|
$
|
(1,356)
|
|
n.m.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share, diluted, as
reported
|
|
$
|
0.44
|
|
$
|
0.73
|
|
|
|
$
|
1.21
|
|
$
|
1.49
|
|
|
Add (Deduct): Impact of
special items
|
|
0.12
|
|
(1.25)
|
|
|
|
0.38
|
|
(4.84)
|
|
|
Deduct: Net impact of
net income (loss) above from fuel contracts divided by dilutive
shares
|
|
(0.04)
|
|
—
|
|
|
|
(0.02)
|
|
(0.04)
|
|
|
Add (Deduct): Net
income (loss) tax impact of special items (a)
|
|
(0.02)
|
|
0.30
|
|
|
|
(0.06)
|
|
1.17
|
|
|
Deduct: GAAP to
Non-GAAP diluted weighted average shares difference (b)
|
|
—
|
|
(0.01)
|
|
|
|
—
|
|
(0.07)
|
|
|
Net income (loss) per share, diluted, excluding
special items
|
|
$
|
0.50
|
|
$
|
(0.23)
|
|
n.m.
|
|
$
|
1.51
|
|
$
|
(2.29)
|
|
n.m.
|
|
(a) Tax amounts for
each individual special item are calculated at the Company's
effective rate for the applicable period and totaled in this line
item.
|
(b) Adjustment related
to GAAP and Non-GAAP diluted weighted average shares difference,
due to the Company being in a Net income position on a GAAP
basis versus a Net loss position
on a Non-GAAP basis for the three and nine months ended
September 30, 2021.
|
Southwest Airlines
Co.
|
Comparative
Consolidated Operating Statistics
|
(unaudited)
|
Relevant comparative
operating statistics for the three and nine months ended
September 30, 2022 and 2021 are included below. The Company
provides these operating
statistics because they
are commonly used in the airline industry and, as such, allow
readers to compare the Company's performance against its results
for the prior
year period, as well as
against the performance of the Company's peers.
|
|
|
Three months ended
|
|
|
|
|
Nine months ended
|
|
|
|
|
|
September 30,
|
|
|
Percent
|
|
September 30,
|
|
|
Percent
|
|
|
2022
|
|
2021
|
|
Change
|
|
2022
|
|
2021
|
|
Change
|
Revenue passengers
carried (000s)
|
|
34,434
|
|
|
29,303
|
|
|
17.5
|
|
93,688
|
|
|
69,686
|
|
|
34.4
|
Enplaned passengers
(000s)
|
|
43,157
|
|
|
36,534
|
|
|
18.1
|
|
116,446
|
|
|
87,247
|
|
|
33.5
|
Revenue passenger miles
(RPMs) (in millions) (a)
|
|
33,534
|
|
|
31,285
|
|
|
7.2
|
|
92,540
|
|
|
73,850
|
|
|
25.3
|
Available seat miles
(ASMs) (in millions) (b)
|
|
39,272
|
|
|
38,756
|
|
|
1.3
|
|
110,978
|
|
|
95,316
|
|
|
16.4
|
Load factor
(c)
|
|
85.4
|
%
|
|
80.7
|
%
|
|
4.7 pts.
|
|
83.4
|
%
|
|
77.5
|
%
|
|
5.9 pts.
|
Average length of
passenger haul (miles)
|
|
974
|
|
|
1,068
|
|
|
(8.8)
|
|
988
|
|
|
1,060
|
|
|
(6.8)
|
Average aircraft stage
length (miles)
|
|
711
|
|
|
808
|
|
|
(12.0)
|
|
733
|
|
|
794
|
|
|
(7.7)
|
Trips flown
|
|
351,218
|
|
|
306,173
|
|
|
14.7
|
|
965,817
|
|
|
767,453
|
|
|
25.8
|
Seats flown (000s)
(d)
|
|
54,609
|
|
|
47,544
|
|
|
14.9
|
|
149,913
|
|
|
119,171
|
|
|
25.8
|
Seats per trip
(e)
|
|
155.5
|
|
|
155.3
|
|
|
0.1
|
|
155.2
|
|
|
155.3
|
|
|
(0.1)
|
Average passenger
fare
|
|
$
|
163.01
|
|
|
$
|
144.24
|
|
|
13.0
|
|
$
|
169.37
|
|
|
$
|
136.45
|
|
|
24.1
|
Passenger revenue yield
per RPM (cents) (f)
|
|
16.74
|
|
|
13.51
|
|
|
23.9
|
|
17.15
|
|
|
12.88
|
|
|
33.2
|
RASM (cents)
(g)
|
|
15.84
|
|
|
12.07
|
|
|
31.2
|
|
15.90
|
|
|
11.27
|
|
|
41.1
|
PRASM (cents)
(h)
|
|
14.29
|
|
|
10.91
|
|
|
31.0
|
|
14.30
|
|
|
9.98
|
|
|
43.3
|
CASM (cents)
(i)
|
|
14.83
|
|
|
10.18
|
|
|
45.7
|
|
14.63
|
|
|
9.67
|
|
|
51.3
|
CASM, excluding Fuel
and oil expense (cents)
|
|
10.38
|
|
|
7.63
|
|
|
36.0
|
|
10.68
|
|
|
7.29
|
|
|
46.5
|
CASM, excluding special
items (cents)
|
|
14.76
|
|
|
12.23
|
|
|
20.7
|
|
14.58
|
|
|
12.83
|
|
|
13.6
|
CASM, excluding Fuel
and oil expense and special items (cents)
|
|
10.37
|
|
|
9.63
|
|
|
7.7
|
|
10.65
|
|
|
10.40
|
|
|
2.4
|
CASM, excluding Fuel
and oil expense, special items, and profitsharing expense
(cents)
|
|
10.22
|
|
|
9.43
|
|
|
8.4
|
|
10.49
|
|
|
10.21
|
|
|
2.7
|
Fuel costs per gallon,
including fuel tax (unhedged)
|
|
$
|
3.74
|
|
|
$
|
2.03
|
|
|
84.2
|
|
$
|
3.53
|
|
|
$
|
1.88
|
|
|
87.8
|
Fuel costs per gallon,
including fuel tax
|
|
$
|
3.39
|
|
|
$
|
2.01
|
|
|
68.7
|
|
$
|
3.05
|
|
|
$
|
1.87
|
|
|
63.1
|
Fuel costs per gallon,
including fuel tax (economic)
|
|
$
|
3.34
|
|
|
$
|
2.04
|
|
|
63.7
|
|
$
|
3.03
|
|
|
$
|
1.92
|
|
|
57.8
|
Fuel consumed, in
gallons (millions)
|
|
515
|
|
|
491
|
|
|
4.9
|
|
1,438
|
|
|
1,203
|
|
|
19.5
|
Active fulltime
equivalent Employees (j)
|
|
64,123
|
|
|
53,984
|
|
|
18.8
|
|
64,123
|
|
|
53,984
|
|
|
18.8
|
Aircraft at end of
period (k)
|
|
742
|
|
|
737
|
|
|
0.7
|
|
742
|
|
|
737
|
|
|
0.7
|
|
(a) A revenue passenger
mile is one paying passenger flown one mile. Also referred to as
"traffic," which is a measure of demand for a given
period.
|
(b) An available seat
mile is one seat (empty or full) flown one mile. Also referred to
as "capacity," which is a measure of the space available to carry
passengers in a given period.
|
(c) Revenue passenger
miles divided by available seat miles.
|
(d) Seats flown is
calculated using total number of seats available by aircraft type
multiplied by the total trips flown by the same aircraft type
during a particular period.
|
(e) Seats per trip is
calculated by dividing seats flown by trips flown.
|
(f) Calculated as
passenger revenue divided by revenue passenger miles. Also referred
to as "yield," this is the average cost paid by a paying passenger
to fly one mile, which is a measure of revenue production and
fares.
|
(g) RASM (unit revenue)
- Operating revenue yield per ASM, calculated as operating revenue
divided by available seat miles. Also referred to as "operating
unit revenues," this is a measure of operating revenue production
based on the total available seat miles flown during a particular
period.
|
(h) PRASM (Passenger
unit revenue) - Passenger revenue yield per ASM, calculated as
passenger revenue divided by available seat miles. Also referred to
as "passenger unit revenues," this is a measure of passenger
revenue production based on the total available seat miles flown
during a particular period.
|
(i) CASM (unit costs) -
Operating expenses per ASM, calculated as operating expenses
divided by available seat miles. Also referred to as "unit costs"
or "cost per available seat mile," this is the average cost to fly
an aircraft seat (empty or full) one mile, which is a measure of
cost efficiencies.
|
(j) Included less than
500 Employees on Extended Emergency Time Off at September 30,
2021.
|
(k) Included 24 Boeing
737 Next Generation aircraft in storage as of September 30,
2021.
|
Southwest Airlines
Co.
Condensed
Consolidated Balance Sheet
(in
millions)
(unaudited)
|
|
|
|
September 30, 2022
|
|
December 31,
2021
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
10,443
|
|
$
|
12,480
|
|
Short-term investments
|
|
3,230
|
|
3,024
|
|
Accounts and other receivables
|
|
1,316
|
|
1,357
|
|
Inventories of parts and supplies, at cost
|
|
776
|
|
537
|
|
Prepaid expenses and other current assets
|
|
653
|
|
638
|
|
Total current assets
|
|
16,418
|
|
18,036
|
|
Property and equipment,
at cost:
|
|
|
|
|
Flight equipment
|
|
22,505
|
|
21,226
|
|
Ground property and equipment
|
|
6,727
|
|
6,342
|
|
Deposits on flight equipment purchase
contracts
|
|
587
|
|
—
|
|
Assets constructed for others
|
|
19
|
|
6
|
|
|
|
29,838
|
|
27,574
|
|
Less allowance for depreciation and
amortization
|
|
13,501
|
|
12,732
|
|
|
|
16,337
|
|
14,842
|
|
Goodwill
|
|
970
|
|
970
|
|
Operating lease
right-of-use assets
|
|
1,449
|
|
1,590
|
|
Other assets
|
|
772
|
|
882
|
|
|
|
$
|
35,946
|
|
$
|
36,320
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts payable
|
|
$
|
1,553
|
|
$
|
1,282
|
|
Accrued liabilities
|
|
1,881
|
|
1,624
|
|
Current operating lease liabilities
|
|
233
|
|
239
|
|
Air traffic liability
|
|
6,368
|
|
5,566
|
|
Current maturities of long-term debt
|
|
381
|
|
453
|
|
Total current liabilities
|
|
10,416
|
|
9,164
|
|
|
|
|
|
|
Long-term debt less
current maturities
|
|
8,315
|
|
10,274
|
|
Air traffic liability -
noncurrent
|
|
2,057
|
|
2,159
|
|
Deferred income
taxes
|
|
1,995
|
|
1,770
|
|
Noncurrent operating
lease liabilities
|
|
1,183
|
|
1,315
|
|
Other noncurrent
liabilities
|
|
1,056
|
|
1,224
|
|
Stockholders'
equity:
|
|
|
|
|
Common stock
|
|
888
|
|
888
|
|
Capital in excess of par value
|
|
3,989
|
|
4,224
|
|
Retained earnings
|
|
16,588
|
|
15,774
|
|
Accumulated other comprehensive income
|
|
305
|
|
388
|
|
Treasury stock, at cost
|
|
(10,846)
|
|
(10,860)
|
|
Total stockholders' equity
|
|
10,924
|
|
10,414
|
|
|
|
$
|
35,946
|
|
$
|
36,320
|
|
Southwest Airlines
Co.
Condensed
Consolidated Statement of Cash Flows
(in millions)
(unaudited)
|
|
|
Three months ended September
30,
|
|
Nine months ended September 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
CASH FLOWS FROM OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
277
|
|
$
|
446
|
|
$
|
759
|
|
$
|
909
|
Adjustments to
reconcile net income to cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
335
|
|
322
|
|
984
|
|
949
|
Impairment of long-lived assets
|
|
4
|
|
—
|
|
35
|
|
—
|
Unrealized mark-to-market adjustment on available for sale
securities
|
|
—
|
|
—
|
|
7
|
|
—
|
Unrealized/realized (gain) loss on fuel derivative
instruments
|
|
(26)
|
|
(2)
|
|
(11)
|
|
(25)
|
Deferred
income taxes
|
|
76
|
|
67
|
|
250
|
|
42
|
Loss on
extinguishment of debt
|
|
76
|
|
12
|
|
192
|
|
12
|
Changes in certain
assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
and other receivables
|
|
58
|
|
(23)
|
|
162
|
|
(819)
|
Other
assets
|
|
30
|
|
59
|
|
(14)
|
|
64
|
Accounts
payable and accrued liabilities
|
|
(70)
|
|
(948)
|
|
436
|
|
(25)
|
Air
traffic liability
|
|
(93)
|
|
(442)
|
|
700
|
|
1,103
|
Other
liabilities
|
|
(83)
|
|
(88)
|
|
(292)
|
|
(275)
|
Cash collateral
received from (provided to) derivative counterparties
|
|
(325)
|
|
42
|
|
(41)
|
|
128
|
Other, net
|
|
(25)
|
|
(20)
|
|
44
|
|
12
|
Net cash
provided by (used in) operating activities
|
|
234
|
|
(575)
|
|
3,211
|
|
2,075
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
(1,072)
|
|
(135)
|
|
(2,568)
|
|
(325)
|
Assets constructed for
others
|
|
(7)
|
|
(3)
|
|
(14)
|
|
(3)
|
Purchases of short-term
investments
|
|
(1,743)
|
|
(1,525)
|
|
(4,213)
|
|
(4,500)
|
Proceeds from sales of
short-term and other investments
|
|
1,702
|
|
1,251
|
|
3,982
|
|
3,747
|
Net cash
used in investing activities
|
|
(1,120)
|
|
(412)
|
|
(2,813)
|
|
(1,081)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from Payroll
Support Program loan and warrants
|
|
—
|
|
—
|
|
—
|
|
1,136
|
Proceeds from Employee
stock plans
|
|
12
|
|
13
|
|
32
|
|
39
|
Payments of long-term
debt and finance lease obligations
|
|
(1,679)
|
|
(67)
|
|
(1,825)
|
|
(177)
|
Payments for
repurchases and conversions of convertible debt
|
|
(239)
|
|
(121)
|
|
(648)
|
|
(121)
|
Other, net
|
|
1
|
|
18
|
|
6
|
|
46
|
Net cash
provided by (used in) financing activities
|
|
(1,905)
|
|
(157)
|
|
(2,435)
|
|
923
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH AND CASH
EQUIVALENTS
|
|
(2,791)
|
|
(1,144)
|
|
(2,037)
|
|
1,917
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD
|
|
13,234
|
|
14,124
|
|
12,480
|
|
11,063
|
CASH AND CASH EQUIVALENTS AT END OF
PERIOD
|
|
$
|
10,443
|
|
$
|
12,980
|
|
$
|
10,443
|
|
$
|
12,980
|
NOTE REGARDING USE OF NON-GAAP FINANCIAL MEASURES
The Company's unaudited Condensed Consolidated Financial
Statements are prepared in accordance with accounting principles
generally accepted in the United
States ("GAAP"). These GAAP financial statements may include
(i) unrealized noncash adjustments and reclassifications, which can
be significant, as a result of accounting requirements and
elections made under accounting pronouncements relating to
derivative instruments and hedging and (ii) other charges and
benefits the Company believes are unusual and/or infrequent in
nature and thus may make comparisons to its prior or future
performance difficult.
As a result, the Company also provides financial information in
this release that was not prepared in accordance with GAAP and
should not be considered as an alternative to the information
prepared in accordance with GAAP. The Company provides supplemental
non-GAAP financial information (also referred to as "excluding
special items"), including results that it refers to as "economic,"
which the Company's management utilizes to evaluate its ongoing
financial performance and the Company believes provides additional
insight to investors as supplemental information to its GAAP
results. The non-GAAP measures provided that relate to the
Company's performance on an economic fuel cost basis include Fuel
and oil expense, non-GAAP; Total operating expenses,
non-GAAP; Operating expenses, non-GAAP excluding Fuel and oil
expense; Operating expenses, non-GAAP excluding Fuel and oil
expense and profitsharing; Operating income (loss), non-GAAP; Other
(gains) losses, net, non-GAAP; Income (loss) before income taxes,
non-GAAP; Provision (benefit) for income taxes, net, non-GAAP; Net
income (loss), non-GAAP; and Net income (loss) per share, diluted,
non-GAAP. The Company's economic Fuel and oil expense results
differ from GAAP results in that they only include the actual cash
settlements from fuel hedge contracts - all reflected within Fuel
and oil expense in the period of settlement. Thus, Fuel and oil
expense on an economic basis has historically been utilized by the
Company, as well as some of the other airlines that utilize fuel
hedging, as it reflects the Company's actual net cash outlays for
fuel during the applicable period, inclusive of settled fuel
derivative contracts. Any net premium costs paid related to option
contracts that are designated as hedges are reflected as a
component of Fuel and oil expense, for both GAAP and non-GAAP
(including economic) purposes in the period of contract settlement.
The Company believes these economic results provide further insight
into the impact of the Company's fuel hedges on its operating
performance and liquidity since they exclude any unrealized,
noncash adjustments and reclassifications that are recorded in GAAP
results in accordance with accounting guidance relating to
derivative instruments, and they reflect all cash settlements
related to fuel derivative contracts within Fuel and oil expense.
This enables the Company's management, as well as investors and
analysts, to consistently assess the Company's operating
performance on a year-over-year or quarter-over-quarter basis after
considering all efforts in place to manage fuel expense. However,
because these measures are not determined in accordance with GAAP,
such measures are susceptible to varying calculations, and not all
companies calculate the measures in the same manner. As a result,
the aforementioned measures, as presented, may not be directly
comparable to similarly titled measures presented by other
companies.
Further information on (i) the Company's fuel hedging
program, (ii) the requirements of accounting for derivative
instruments, and (iii) the causes of hedge ineffectiveness
and/or mark-to-market gains or losses from derivative instruments
is included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2021.
The Company's GAAP results in the applicable periods may include
other charges or benefits that are also deemed "special items,"
that the Company believes make its results difficult to compare to
prior periods, anticipated future periods, or industry trends.
Financial measures identified as non-GAAP (or as excluding special
items) have been adjusted to exclude special items. For the periods
presented, in addition to the items discussed above, special items
include:
- Proceeds related to the Payroll Support programs, which were
used to pay a portion of Employee salaries, wages, and
benefits;
- Charges and adjustments to previously accrued amounts related
to the Company's extended leave programs;
- Adjustments for prior period losses reclassified from
Accumulated other comprehensive income ("AOCI") associated with
forward-starting interest rate swap agreements that were terminated
in prior periods related to 12 -8 aircraft leases;
- Noncash impairment charges, primarily associated with
adjustments to the salvage values for previously retired
airframes;
- Unrealized mark-to-market adjustment associated with certain
available for sale securities; and
- Losses associated with the partial extinguishment of the
Company's convertible notes, redemption of the outstanding
principal amount of the Company's 4.750% Notes due 2023, and early
prepayment of debt.
In third quarter 2022, management determined that presentation
within its income statement would be enhanced by classification of
Loss on extinguishment of debt as a separate line item, rather than
its prior presentation where it was included as a component of
Other (gains) losses, net. Such losses are incurred as a result of
opportunistic decisions made by the Company to prepay portions of
its debt, most of which was taken on during the pandemic in order
to provide liquidity during the prolonged downturn in air travel.
Due to the nature of these losses, which are difficult to
accurately predict, and due to the fact that they are not
representative of the Company's day-to-day airline operating
performance, the Company has included such amounts as special items
and thus excluded them from certain of its non-GAAP measures in the
accompanying reconciliations.
Because management believes special items can distort the trends
associated with the Company's ongoing performance as an airline,
the Company believes that evaluation of its financial performance
can be enhanced by a supplemental presentation of results that
exclude the impact of special items in order to enhance consistency
and comparativeness with results in prior periods that do not
include such items and as a basis for evaluating operating results
in future periods. The following measures are often provided,
excluding special items, and utilized by the Company's management,
analysts, and investors to enhance comparability of year-over-year
results, as well as to industry trends: Fuel and oil expense,
non-GAAP; Total operating expenses, non-GAAP; Operating
expenses, non-GAAP excluding Fuel and oil expense; Operating
expenses, non-GAAP excluding Fuel and oil expense and
profitsharing; Operating income (loss), non-GAAP; Other (gains)
losses, net, non-GAAP; Income (loss) before income taxes, non-GAAP;
Provision (benefit) for income taxes, net, non-GAAP; Net income
(loss), non-GAAP; and Net income (loss) per share, diluted,
non-GAAP.
SW-QFS
View original
content:https://www.prnewswire.com/news-releases/southwest-airlines-reports-third-quarter-2022-results-301660603.html
SOURCE Southwest Airlines Co.