Southwest Airlines Shares Slide, Misses Q1 Estimates Due To Holiday Flight Disruptions

Southwest Airlines Co LUV reported first-quarter FY23 operating revenue growth of 21.6% year-over-year to $5.71 billion, missing the consensus of $5.73 billion. 

• EPS loss was $(0.27), compared to $(0.47) in 1Q22, missing the consensus of $(0.23).
• "As expected, we incurred a first-quarter 2023 net loss that resulted from the negative financial impact of approximately $380 million pre-tax, or $294 million after-tax, related to the December 2022 operational disruption. The majority of this impact was driven by a negative revenue impact of approximately $325 million, as a result of cancellations of holiday return travel and a deceleration in bookings for January and February 2023 travel," CEO Bob Jordan said.
• Q1 RASM increased 9.8% Y/Y, driven by a passenger yield increase of 10.6% and a load factor increase of 0.6 points.
• Revenue passenger miles increased 11.6% Y/Y, Available seat miles were up 10.7% Y/Y, and load factor was 77.6% compared to 77% in 1Q22.
• Fuel costs were $3.19 per gallon (+38.7% Y/Y), which included $0.06 per gallon in premium expenses and $0.12 per gallon in favorable cash settlements.
• Southwest Airlines' cash provided by operating activities for Q1 was $706 million, compared to $1.07 billion in 1Q22.
• LUV's liquidity stood at $12.7 billion, with debt outstanding of $8 billion. At the end of the quarter, it held $8.36 billion in cash and equivalents.
• The current booking curve appears to have returned close to pre-pandemic norms, and leisure demand and yields continue to be strong heading into the busy summer travel season. However, it expects corporate revenue trends to continue to be choppy as customer travel patterns evolve post-pandemic.

2Q23 Guidance: Southwest Sees RASM down 8% to 11% YoY; ASMs Up ~14%; CASM-X Up 5% to 8% and Economic fuel costs per gallon of $2.45 to $2.55.

FY23 Guidance: Southwest Sees ASMs Up ~14% -15% (prior Up 15% to 16%); CASM-X down 2% to 4% (prior Down 3.5% to 5.5%) and Economic fuel costs per gallon of $2.60 to $2.70 (prior $2.65 to $2.75).

Price Action: LUV shares are trading lower by 4.92% at $29.35 on the last check Thursday.